Page 87 - GSTL_18th June 2020_Vol 37_Part 3

2020 ] ULTRA TECH NATHDWARA CEMENT LTD. v. UNION OF INDIA 301
that the Code and the Regulations, read as a whole, together with the observations
of expert bodies and this Court’s judgment, all lead to the conclusion that the
equality principle cannot be stretched to treating unequals equally, as that will de-
stroy the very objective of the Code-to resolve stressed assets. Equitable treatment is
to be accorded to each creditor depending upon the class to which it belongs : se-
cured or unsecured, financial or operational.
58. This power in Section 392 is conspicuous by its absence when it comes
to the Adjudicating Authority under the Code, whose jurisdiction is cir-
cumscribed by Section 30(2). It is the Committee of Creditors, Under Sec-
tion 30(4) read with Regulation 39(3), that is vested with the power to ap-
prove resolution plans and make modifications therein as the Committee
deems fit. It is this vital difference between the jurisdiction of the High
Court Under Section 392 of the Companies Act, 1956 and the jurisdiction of
the Adjudicating Authority under the Code that must be kept in mind
when the Adjudicating Authority is to decide on whether a resolution plan
passes muster under the Code. When this distinction is kept in mind, it is
clear that there is no residual jurisdiction not to approve a resolution plan
on the ground that it is unfair or unjust to a class of creditors, so long as the
interest of each class has been looked into and taken care of. It is important
to note that even Under Sections 391 and 392 of the Companies Act, 1956,
ultimately it is the commercial wisdom of the parties to the scheme, reflect-
ed in the 75% majority vote, which then binds all shareholders and credi-
tors. Even Under Sections 391 and 392, the High Court cannot act as a court
of appeal and sit in judgment over such commercial wisdom.
66. Section 31(1) of the Code makes it clear that once a resolution plan is ap-
proved by the Committee of Creditors it shall be binding on all stakeholders, includ-
ing guarantors. This is for the reason that this provision ensures that the successful
resolution Applicant starts running the business of the corporate debtor on a fresh
slate as it were.
67. For the same reason, the impugned NCLAT judgment in holding that claims
that may exist apart from those decided on merits by the resolution professional and
by the Adjudicating Authority/Appellate Tribunal can now be decided by an ap-
propriate forum in terms of Section 60(6) of the Code, also militates against the ra-
tionale of Section 31 of the Code. A successful resolution Applicant cannot sudden-
ly be faced with “undecided” claims after the resolution plan submitted by him has
been accepted as this would amount to a hydra head popping up which would
throw into uncertainty amounts payable by a prospective resolution Applicant who
successfully take over the business of the corporate debtor. All claims must be sub-
mitted to and decided by the resolution professional so that a prospective resolution
Applicant knows exactly what has to be paid in order that it may then take over
and run the business of the corporate debtor. This the successful resolution Appli-
cant does on a fresh slate, as has been pointed out by us hereinabove. For these rea-
sons, the NCLAT judgment must also be set aside on this count.”
[Emphasis supplied]
20. Considered in light of the ratio of the above judgment and the
stance of Hon’ble the Finance Minister before the upper house of the Parliament,
it is clear that the financial creditors have to be given a precedence in the ratio of
payments when the resolution plan is being finalized. It is the financial creditors
who are given right to vote in the COC whereas, the operational creditors viz.
Commercial Taxes Department of the Central Government or the State Govern-
ment as the case may be, have no right of audience. The purpose of the statute is

GST LAW TIMES  18th June 2020  87