Background 

In the instant case at hand TP Central Odisha Distribution Ltd. v. COS Board Industries Ltd, Since both appeals raise similar factual and legal issues, the NCLAT decides both of the appeals that are challenging the Adjudicating Authority’s ruling together. In both cases, a Corporate Insolvency Resolution Process was started against the Corporate Debtor, and following the Interim Resolution Processional’s public announcement, the Appellants filed their Form-B claim as Operational Creditors. The Appellants were paid less than the claim they submitted in Form-B, and the Financial Creditors were given a substantially greater sum, according to the Resolution Plan that the Adjudicating Authority authorised in the aforementioned orders. The appellants chose the current appeals to contest the impugned orders because they were displeased with the contested decisions made by the adjudicating authority.

Issue 

Can the appellants in the current appeals allege payment discrimination against the financial creditors?

Analysis of Tribunal Decision 

The Operational Creditor cannot demand equal payment to the Financial Creditors, so the Resolution Plan approved by the Adjudicating Authority does not discriminate in the distribution of the proposed amount to the Operational Creditor relative to Financial Creditors, according to a division bench of the NCLAT made up of Justice Ashok Bhushan and Justice Mr Barun Mitra Technical Member.

The Court noted that there is no question that the claim made by the appellants in the CIRP of the Corporate Debtor was accepted by the Resolution Professional, and that in both Resolution Plans, Financial Creditors received payments that were significantly higher than those made to the appellants’ Operational Creditors. The Court noted that the Operational Creditor cannot demand payment equivalent to the Financial Creditor under Section 53(i)(b) of the IBC and that the Financial Creditor is entitled to obtain payment equal to such workmen’s dues.

The Court determined that the Adjudicating Authority’s approval of the Resolution Plan via the contested orders cannot be faulted because the plan does not comply with IBC provisions and treats operational creditors differently from financial creditors in the proposed distribution of the proposed amount.

CASE NAME – TP Central Odisha Distribution Ltd. v. COS Board Industries Ltd., Company Appeal (AT) (Insolvency) No. 613 and 795 of 2022