Here is a 400-word summary of the content:
In a recent judgment, the National Company Law Appellate Tribunal (NCLAT) has upheld the decision of the Committee of Creditors (CoC) to distribute the amount received from the resolution process of a corporate debtor based on the security interest under the resolution plan. The case is HDFC Bank Ltd. v. Pratim Bayal.
The Adjudicating Authority (NCLAT) has reviewed the resolution plan prepared by the CoC in the corporate insolvency resolution process (CIRP) of Antrix Fintec Private Limited, a debt-ridden company. HDFC Bank Ltd. (HDFC) had advanced a loan to Antrix Fintec and, as security, took a charge on its movable and immovable assets.
After the CIRP was initiated, the CoC prepared a resolution plan, which provided for the distribution of the amount received from the resolution process among the financial creditors, including HDFC. HDFC, however, disputed the distribution plan, claiming that its security interest was not adequately protected.
NCLAT’s Ruling
The National Company Law Appellate Tribunal (NCLAT) allowed the appeal of HDFC and set aside the order of the Adjudicating Authority (NCLAT). NCLAT held that the CoC had the discretion to distribute the amount based on the security interest, as the security interest was subordinate to the claim of other financial creditors.
The NCLAT observed that the security interest of HDFC was created by the company’s declaration of creation of charge in the financial statement, which was subsequently registered with the Registrar of Companies. The Court found that the CoC’s decision to distribute the amount based on the security interest was reasonable and fair.
The NCLAT judgment highlights the importance of the discretion of the CoC in making decisions during the corporate insolvency resolution process. The Court emphasized that the CoC had the authority to make decisions that were beneficial for the collective interest of all creditors, while also giving due consideration to the security interests of other creditors.
In this case, the NCLAT’s decision is a significant one, as it reaffirms the powers of the CoC to make decisions that may not always favor one creditor over another. The ruling will have a wider impact on the corporate insolvency resolution process in India and will provide a clear understanding of the scope of the CoC’s discretion in making decisions during the resolution process.