SC rejects challenge to approval of resolution plan of Reliance Infratel

The Supreme Court on Tuesday rejected the challenge of operational creditors on approval of resolution plan of the Reliance Infratel Limited by NCLT saying the plan has been duly approved by a requisite majority of the Committee of Creditors in conformity with Insolvency and Bankruptcy Code (IBC).

A bench of Justices DY Chandrachud and M R Shah said that exclusion of some of the financial creditors from the Committee of Creditors (CoC) is of no consequence as the plan has been approved by a 100 per cent voting share of the CoC.

In the present case, the resolution plan has been duly approved by a requisite majority of the CoC in conformity with Section 30(4). Whether or not some of the financial creditors were required to be excluded from the CoC is of no consequence, once the plan is approved by a 100 per cent voting share of the CoC, the bench said.

It said that the jurisdiction of the adjudicating authority (National Company Law Tribunal) was confined by the provisions of Section 31(1) to determine whether the requirements of IBC have been fulfilled in the plan as approved by the CoC.

As such, once the requirements of the statute have been duly fulfilled, the decisions of the adjudicating authority and the appellate authority are in conformity with law. For the above reasons, we find no merit in the appeal. The appeal shall accordingly stand dismissed, the top court said.

Operational creditors of Reliance Infratel Limited, who have challenged the approval of resolution plan in the top court by the NCLT and upholding of order by the National Company Law Appellate Tribunal (NCLAT) on the ground of low payout under the plan are telecom service providers of the company and they claim to have provided core service in operation and maintenance of telecom towers and the optical fibre network and associated passive infrastructure equipment.

The operational creditors have claimed that they had been unfairly or inequitably treated in regard to the distribution of funds.

The bench said, Once the requirements of the IBC have been fulfilled, the adjudicating authority (NCLT) and the appellate authority (NCLAT) are duty bound to abide by the discipline of the statutory provisions. It needs no emphasis that neither the adjudicating authority nor the appellate authority has an uncharted jurisdiction in equity. The jurisdiction arises within and as a product of a statutory framework.

It said that to argue that a residuary jurisdiction must be exercised to alter the delicate economic coordination that is envisaged by the statute would do violence on its purpose and would be an impermissible exercise of the adjudicating authoritys power of judicial review.

The top court said that the IBC, in its view, is a complete code in itself and the code defines what is fair and equitable treatment by constituting a comprehensive framework within which the actors partake in the insolvency process.

The process envisaged by the IBC is a direct representation of certain economic goals of the Indian economy. It is enacted after due deliberation in Parliament and accords rights and obligations that are strictly regulated and coordinated by the statute and its regulations, it said.

The top court said that the approved resolution plan has in fact provided for the payments to operational creditors, the percentage of recovery being 19.62 per cent while on the other hand, the payment to financial creditors is 10.32 per cent.

It said that the submission that there has been a failure to maximise the value of the assets has not been substantiated by any concrete material before the Court, apart from the reference to the preference shares.

Fair and equitable treatment, in other words, is what is fair and equitable between the operational creditors as a class, and not between different classes of creditors, the bench said.

The top court noted that the liquidation value of the Corporate Debtor (Reliance Infratel Ltd) is Rs 4339.58 crores and the amount being infused by the successful resolution applicant is Rs 3720 crores.

"The amount of Rs 800 crores is a value ascribed under the approved resolution plan to be realised by the Corporate Debtor, pursuant to the remittance of proceeds in respect of the preference shares. Hence, cumulatively, the value being distributed under the approved valuation plan is Rs 4520 crores, it said.

On December 3, 2020, the NCLT, Mumbai approved the resolution plan formulated in the course of the insolvency resolution process of the Reliance Infratel Ltd and thereafter NCLAT has upheld the order in January, 2021.

On May 15, 2018, the corporate resolution insolvency process was initiated by the NCLT and an interim resolution professional was appointed.

In 2019, the resolution professional received resolution plans from the four prospective resolution applicants--Bharti Airtel Ltd.; Reliance Digital Platform and Project Services Limited, through its division Infrastructure Projects; VFSI Holdings Pte. Ltd and UV Asset Construction Company Ltd.

The resolution plan submitted by Reliance Digital Platform and Project Services Limited was taken forward as a preferred resolution plan on the basis of its? feasibility, viability and implementability and the company was declared as a successful resolution applicant. The resolution plan was approved with a 100 per cent voting share of the CoC.