Page 86 - GSTL_18th June 2020_Vol 37_Part 3

300 GST LAW TIMES [ Vol. 37
The Committee felt that the interests of operational creditors must be
protected, not by tinkering with what minimum must be guaranteed
to them statutorily, but by improving the quality of resolution plans
overall. This could be achieved by dedicated efforts of regulatory
bodies including the IBBI and Indian Banks’ Association.
Finally, the Committee agreed that presently, most of the resolution
plans are in the process of submission and there is no empirical evi-
dence to further the argument that operational creditors do not re-
ceive a fair share in the resolution process under the current scheme
of the Code. Hence, the Committee decided to continue with the pre-
sent arrangement without making any amendments to the Code.
Ultimately, the Committee decided against any amendment to be
made to the existing scheme of the Code, thereby retaining the pre-
scription as to the minimum value that was to be paid to the opera-
tional creditors under a resolution plan.
56. By reading paragraph 77 de hors the earlier paragraphs, the Appellate
Tribunal has fallen into grave error. Paragraph 76 clearly refers to the
UNCITRAL Legislative Guide which makes it clear beyond any doubt that
equitable treatment is only of similarly situated creditors. This being so, the
observation in paragraph 77 cannot be read to mean that financial and op-
erational creditors must be paid the same amounts in any resolution plan
before it can pass muster. On the contrary, paragraph 77 itself makes it clear
that there is a difference in payment of the debts of financial and operation-
al creditors, operational creditors having to receive a minimum payment,
being not less than liquidation value, which does not apply to financial
creditors. The amended Regulation 38 set out in paragraph 77 again does
not lead to the conclusion that financial and operational creditors, or se-
cured and unsecured creditors, must be paid the same amounts, percentage
wise, under the resolution plan before it can pass muster. Fair and equitable
dealing of operational creditors’ rights under the said Regulation involves
the resolution plan stating as to how it has dealt with the interests of opera-
tional creditors, which is not the same thing as saying that they must be
paid the same amount of their debt proportionately. Also, the fact that the
operational creditors are given priority in payment over all financial credi-
tors does not lead to the conclusion that such payment must necessarily be
the same recovery percentage as financial creditors. So long as the provi-
sions of the Code and the Regulations have been met, it is the commercial
wisdom of the requisite majority of the Committee of Creditors which is to
negotiate and accept a resolution plan, which may involve differential
payment to different classes of creditors, together with negotiating with a
prospective resolution Applicant for better or different terms which may al-
so involve differences in distribution of amounts between different classes
of creditors.
57. Indeed, by vesting the Committee of Creditors with the discretion of accepting
resolution plans only with financial creditors, operational creditors having no vote,
the Code itself differentiates between the two types of creditors for the reasons given
above.
Quite clearly, secured and unsecured financial creditors are differentiated when it
comes to amounts to be paid under a resolution plan, together with what dissenting
secured or unsecured financial creditors are to be paid. And, most importantly, op-
erational creditors are separately viewed from these secured and unsecured finan-
cial creditors in S. No. 5 of paragraph 7 of statutory Form H. Thus, it can be seen
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