# PRATAP TECHNOCRATS (P) LTD. & ORS v. MONITORING COMMITTEE OF RELIANCE INFRATEL LIMITED & ANR

- **Citation:** [2021] 8 S.C.R. 938
- **Court:** Supreme Court of India
- **Decided:** 2021-08-10
- **Case number:** Civil Appeal No.676 of 2021
- **Bench:** Dr Dhananjaya Y Chandrachud, M R Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/pratap-technocrats-p-ltd-ors-v-monitoring-committee-of-reliance-infratel-35285
- **Pages:** 40

## Headnote

Insolvency and Bankruptcy Code, 2016:
ss. 30(1), 30(2), 31, 53 -Corporate Insolvency Resolution
Process (CIRP) - Approval of resolution plan - Initiation of CIRP
of Corporate Debtor - Resolution applicant declared successful -
Resolution plan approved with 100 per cent voting share of the
Committee of Creditors(CoC) and subsequently approved by NCLT
- Appellants-Operational creditors challenged the order of NCLT
approving the resolution plan on the ground that the claim of the
appellants had not received a fair and equitable treatment - NCLAT
upheld the order of NCLT holding that the equitable treatment can
be claimed only by similarly situated creditors - On appeal, held:
Decision to approve a resolution plan is entrusted to the CoC -
Jurisdiction of the Adjudicating Authority and the Appellate
Authority cannot extend into entering upon merits of a business
decision made by a requisite majority of the CoC in its commercial
wisdom - Nor there is a residual equity based jurisdiction in the
Authorities to interfere in the decision of CoC - Commercial wisdom
of the CoC in its collegial capacity is, thus, not justiciable -
Equitable treatment of creditors is equitable treatment only within
the same class - Financial creditors belong to a class distinct from
operational creditors - Fair and equitable' norm does not mean
that financial and operational creditors must be paid the same
amounts in any resolution plan before it can pass muster - On facts,
resolution plan duly approved by a requisite majority of the CoC in
conformity with s. 30(4) - Exclusion of some of the financial creditors
from the CoC of no consequence, once the plan approved by a 100
per cent voting share of the CoC - Furthermore, value of preference
shares included in calculating the liquidation value of the Corporate
[2021] 8 S.C.R. 938
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Debtor; and that the liquidation value due to the unsecured
operational creditors would remain nil - Jurisdiction of the
Adjudicating Authority was confined by the provisions of s. 31(1)
to determine whether the requirements of s. 30(2) have been fulfilled
in the plan as approved by the CoC - Thus, the decisions of NCLT
and NCLAT in conformity with law.
ss. 31(1), 30(2) - Resolution plan - Approval by Committee
of Creditors - Jurisdiction of NCLT and NCLAT - Held: Under the
provisions of IBC, neither the Adjudicating Authority-NCLT nor the
Appellate Authority-NCLAT have an unchartered jurisdiction in
equity - Jurisdiction arises within and as a product of a statutory
framework.
Purpose and objective of - Held: IBC is a complete code in
itself - It defines fair and equitable treatment by constituting a
comprehensive framework within which the actors partake in the
insolvency process - Process envisaged by the IBC is a direct
representation of certain economic goals of the Indian economy -
To submit that a residuary jurisdiction must be exercised to alter the
delicate economic coordination envisaged by the statute, would do
violence on its purpose and would be an impermissible exercise of
the Adjudicating Authority's power of judicial review - Thus, once
the requirements of the IBC have been fulfilled, the Adjudicating
Authority and the Appellate Authority duty bound to abide the
statutory provisions.
Insolvency and Bankruptcy laws: Resolution/reorganization
plans - Challenge to, on the grounds of fairness and equity by
foreign jurisdictions vis-a-vis Indian insolvency regime - Discussed
- United Kingdom's Insolvency Act, 1986 - United States' US
Bankruptcy Code - Indian Insolvency and Bankruptcy Code, 2016.
Dismissing the appeal, the Court
HELD:1.1 The resolution plan was approved by the CoC,
in compliance with the provisions of the IBC. The jurisdiction of
the Adjudicating Authority under Section 31(1) of the IBC is to
determine whether the resolution plan, as approved by the CoC,
complies with the requirements of Section 30(2). The NCLT is
within its jurisdiction in approving a resolution plan which accord

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SUPREME COURT REPORTS
[2021] 8 S.C.R.
PRATAP TECHNOCRATS (P) LTD. & ORS.
v.
MONITORING COMMITTEE OF RELIANCE INFRATEL
LIMITED & ANR.
(Civil Appeal No 676 of 2021)
AUGUST 10, 2021
[DR DHANANJAYA Y CHANDRACHUD AND
M R SHAH, JJ.]
Insolvency and Bankruptcy Code, 2016:
ss. 30(1), 30(2), 31, 53 -Corporate Insolvency Resolution
Process (CIRP) - Approval of resolution plan - Initiation of CIRP
of Corporate Debtor - Resolution applicant declared successful -
Resolution plan approved with 100 per cent voting share of the
Committee of Creditors(CoC) and subsequently approved by NCLT
- Appellants-Operational creditors challenged the order of NCLT
approving the resolution plan on the ground that the claim of the
appellants had not received a fair and equitable treatment - NCLAT
upheld the order of NCLT holding that the equitable treatment can
be claimed only by similarly situated creditors - On appeal, held:
Decision to approve a resolution plan is entrusted to the CoC -
Jurisdiction of the Adjudicating Authority and the Appellate
Authority cannot extend into entering upon merits of a business
decision made by a requisite majority of the CoC in its commercial
wisdom - Nor there is a residual equity based jurisdiction in the
Authorities to interfere in the decision of CoC - Commercial wisdom
of the CoC in its collegial capacity is, thus, not justiciable -
Equitable treatment of creditors is equitable treatment only within
the same class - Financial creditors belong to a class distinct from
operational creditors - Fair and equitable' norm does not mean
that financial and operational creditors must be paid the same
amounts in any resolution plan before it can pass muster - On facts,
resolution plan duly approved by a requisite majority of the CoC in
conformity with s. 30(4) - Exclusion of some of the financial creditors
from the CoC of no consequence, once the plan approved by a 100
per cent voting share of the CoC - Furthermore, value of preference
shares included in calculating the liquidation value of the Corporate
[2021] 8 S.C.R. 938
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Debtor; and that the liquidation value due to the unsecured
operational creditors would remain nil - Jurisdiction of the
Adjudicating Authority was confined by the provisions of s. 31(1)
to determine whether the requirements of s. 30(2) have been fulfilled
in the plan as approved by the CoC - Thus, the decisions of NCLT
and NCLAT in conformity with law.
ss. 31(1), 30(2) - Resolution plan - Approval by Committee
of Creditors - Jurisdiction of NCLT and NCLAT - Held: Under the
provisions of IBC, neither the Adjudicating Authority-NCLT nor the
Appellate Authority-NCLAT have an unchartered jurisdiction in
equity - Jurisdiction arises within and as a product of a statutory
framework.
Purpose and objective of - Held: IBC is a complete code in
itself - It defines fair and equitable treatment by constituting a
comprehensive framework within which the actors partake in the
insolvency process - Process envisaged by the IBC is a direct
representation of certain economic goals of the Indian economy -
To submit that a residuary jurisdiction must be exercised to alter the
delicate economic coordination envisaged by the statute, would do
violence on its purpose and would be an impermissible exercise of
the Adjudicating Authority's power of judicial review - Thus, once
the requirements of the IBC have been fulfilled, the Adjudicating
Authority and the Appellate Authority duty bound to abide the
statutory provisions.
Insolvency and Bankruptcy laws: Resolution/reorganization
plans - Challenge to, on the grounds of fairness and equity by
foreign jurisdictions vis-a-vis Indian insolvency regime - Discussed
- United Kingdom's Insolvency Act, 1986 - United States' US
Bankruptcy Code - Indian Insolvency and Bankruptcy Code, 2016.
Dismissing the appeal, the Court
HELD:1.1 The resolution plan was approved by the CoC,
in compliance with the provisions of the IBC. The jurisdiction of
the Adjudicating Authority under Section 31(1) of the IBC is to
determine whether the resolution plan, as approved by the CoC,
complies with the requirements of Section 30(2). The NCLT is
within its jurisdiction in approving a resolution plan which accords
with the IBC. There is no equity-based jurisdiction with the NCLT,
under the provisions of the IBC. [Para 22][965-E-F]
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF
RELIANCE INFRATEL LTD.
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1.2 Section 30(1) envisages the submission of a resolution
plan by a resolution applicant. On the submission of the resolution
plan, the Resolution Professional is required to examine it and
to confirm, in terms of sub-Section (2) of Section 30, that the plan
abides by the statutory requirements spelt out in clauses (a) to
(f). The RP has to present to the CoC, for its approval, such
resolution plans which conform to the conditions specified in
sub-Section (2) of Section 30. The approval of the resolution plan
is a statutory function which is entrusted to the CoC, under
sub-Section (4) of Section 30. The CoC may approve a resolution
plan with a voting percentage of not less 66 per cent of the voting
shares of financial creditors after considering its feasibility and
viability; the manner of distribution proposed having regard to
the order of priority amongst creditors laid down in Section 53(1)
of the IBC, including priority and value of the security interest of
the secured creditors; and such other requirements as may be
specified by the Insolvency and Bankruptcy Board of India. In
other words, the decision to approve a resolution plan is entrusted
to the CoC. [Para 23, 24][965-G-H; 966-A-C]
1.3 The function of the Adjudicating Authority under Section
31 is to determine whether the resolution plan as approved by
the CoC under Section 30(4) meets the requirements under
Section 30(2). If the Adjudicating Authority is satisfied that the
resolution plan, as approved, meets the requirements under
sub-Section (2) of Section 30, it shall by order approve the
resolution plan which shall then be binding on the Corporate
Debtor and all stakeholders, including those specifically spelt
out. [Para 25][967-A-B]
1.4 The jurisdiction which has been conferred upon the
Adjudicating Authority in regard to the approval of a resolution
plan is statutorily structured by sub-Section (1) of Section 31.
The jurisdiction is limited to determining whether the
requirements which are specified in sub-Section (2) of Section
30 have been fulfilled. This is a jurisdiction which is statutorilydefined, recognised and conferred, and hence cannot be equated
with a jurisdiction in equity, that operates independently of the
provisions of the statute. The Adjudicating Authority as a body
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owing its existence to the statute, must abide by the nature and
extent of its jurisdiction as defined in the statute itself. The
jurisdiction of the Appellate Authority under Section 61(3), while
considering an appeal against an order approving a resolution
plan under Section 31, is similarly structured on specified grounds.
[Para 26, 27][967-E-G]
1.5 There are specific requirements which have been spelt
out in sub-Section (2)(b) of Section 30, as regards the operational
creditors. The amount which is payable to the operational
creditors towards their debts must at least be either what is
provided in sub-clause (i) or sub-clause (ii) of clause (b), whichever
is higher. Sub clause (i) refers to the amount paid to the
operational creditors in the event of a liquidation under Section
53. Sub-clause (ii) refers to the amount that would have been
paid to the operational creditors, if the amount to be distributed
under the resolution plan was distributed in accordance with the
order of priority under Section 53(1)(b), which provides for a
waterfall mechanism. [Para 28][968-D; 969-A-B]
1.6 These provisions indicate that the ambit of the
Adjudicating Authority is to determine whether the amount that
is payable to the operational creditors under the resolution plan
is consistent with the above norms which have been stipulated in
clause (b) of sub-clause (2) of Section 30. Significantly, Explanation1 to clause (b), which is clarificatory in nature, provides that a
distribution which is in accordance with the provisions of the
clause shall be fair and equitable to such creditors. 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 statute has indicated that once
the requirements of Section 30(2)(b) are fulfilled, the distribution
in accordance with its provisions is to be treated as fair and
equitable to the operational creditors. [Para 29][969-C-E]
1.7 The entitlement of the operational creditors being
defined by sub-clause (b) of sub-section (2) of Section 30, the
clarification contained in Explanation-1 must apply. As such, as
long as the payment under the resolution plan is fair and equitable
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF
RELIANCE INFRATEL LTD.
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[2021] 8 S.C.R.
amongst the operational creditors as a class, it satisfies the
requirements of Section 30(2)(b). [Para 30][969-E-F]
1.8 The consistent principle of law is that neither the
Adjudicating Authority nor the Appellate Authority can enter into
the commercial wisdom underlying the approval granted by the
CoC to the resolution plan. The commercial wisdom of the CoC
in its collegial capacity is, hence, not justiciable. [Para 31][970B-C]
1.9 Once the Adjudicating Authority is satisfied that the
CoC has applied its mind to the statutory requirements spelt out
in sub-Section (2) of Section 30, it must then pass the resolution
plan. The equitable treatment of creditors is equitable treatment
only within the same class. Financial creditors belong to a class
distinct from operational creditors. The UNCITRAL Legislative
Guide makes it clear that equitable treatment is only of similarly
situated creditors. The fair and equitable' norm does not mean
that financial and operational creditors must be paid the same
amounts in any resolution plan before it can pass muster. [Para
37, 38][973-G-H; 974-D]
1.10 The jurisdiction of the Adjudicating Authority and the
Appellate Authority cannot extend into entering upon merits of a
business decision made by a requisite majority of the CoC in its
commercial wisdom. Nor is there a residual equity based
jurisdiction in the Adjudicating Authority or the Appellate
Authority to interfere in this decision, so long as it is otherwise
in conformity with the provisions of the IBC and the Regulations
under the enactment. [Para 39][975-B-C]
1.11 Certain foreign jurisdictions allow resolution/
reorganization plans to be challenged on grounds of fairness and
equity. One of the grounds under which a company voluntary
arrangement can be challenged under the United Kingdom's
Insolvency Act, 1986 is that it unfairly prejudices the interests of
a creditor of the company. The United States' US Bankruptcy
Code provides that if a restructuring plan has to clamp down on a
dissenting class of creditors, one of the conditions that it should
satisfy is that it does not unfairly discriminate, and is fair and
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equitable. However, under the Indian insolvency regime, it
appears that a conscious choice has been made by the legislature
to not confer any independent equity based jurisdiction on the
Adjudicating Authority other than the statutory requirements laid
down under sub-Section (2) of Section 30 of the IBC. [Para
40][975-C-F]
1.12 The IBC is a complete code in itself. It 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. 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 Authority's power of judicial review. Hence, once
the requirements of the IBC have been fulfilled, the Adjudicating
Authority and the Appellate Authority are duty bound to abide by
the discipline of the statutory provisions. Neither the Adjudicating
Authority nor the Appellate Authority have an unchartered
jurisdiction in equity. The jurisdiction arises within and as a
product of a statutory framework. [Para 41][976-B-D, F-G]
2.1 The submission that there has been a failure to maximise
the value of the assets and to balance the interests of the
stakeholders has not been substantiated by any concrete material
before the Court, apart from the reference to the preference
shares which has already been clarified. Whether the interest of
all stakeholders, including the operational creditors, has been
adequately balanced has to be determined within the four corners
of the statutory provisions of the IBC. It must be borne in mind
that the jurisdiction of the Adjudicating Authority is circumscribed
by the terms of the provisions conferring the jurisdiction. In the
instant case, the approved resolution plan has in fact provided
for the payments to operational creditors, the percentage of
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF
RELIANCE INFRATEL LTD.
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recovery being 19.62 per cent. On the other hand, the payment
to financial creditors is 10.32 per cent. [Para 36][973-D-F]
2.2 In the instant 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 jurisdiction of the Adjudicating Authority was confined
by the provisions of Section 31(1) to determine whether the
requirements of Section 30(2) 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.
[Para 42][977-A-C]
Committee of Creditors of Essar Steel India Limited v.
Satish Kumar Gupta (2020) 8 SCC 531 : [2019] 16
SCR 275; Swiss Ribbons (P) Ltd. v. Union of India
(2019) 4 SCC 17 : [2019] 3 SCR 535; K Sashidhar v.
India Overseas Bank (2019) 12 SCC 150 : [2019] 3
SCR 845 - relied on.
Maneka Gandhi v. Union of India (1978) 1 SCC 248 :
[1978] 2 SCR 621 - referred to.
3.1 As regards, the inclusion of the realisable value from
the sale of preference shares held by its subsidiary-RB Limited,
in RR Limited, in determining the liquidation value of the
Corporate Debtor; it has been clarified in the affidavit filed by
the insolvency professional, that under the Insolvency and
Bankruptcy Code and its regulations, the RP appointed two
registered valuers in accordance with Regulation 27 of the
Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016 to carry out
the valuation of the Corporate Debtor and to determine the
liquidation value and fair value in accordance with Regulation
35(1). These values were placed before the CoC, in accordance
with Regulation 35(2) of the CIRP Regulations, upon receipt of
the resolution plans. The submission of the appellants that the
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realisable value from these preference shares is excluded from
the liquidation value of the Corporate Debtor has been rebutted
by a specific clarification contained in the Monitoring
Committee's affidavit, which was filed in these proceedings. As a
matter of fact, the realisable value for the Corporate Debtor on
account of any proceeds realised from the preference shares held
by its subsidiary, is included in the determination of the liquidation
value of the Corporate Debtor. This statement in the affidavit is
duly supported by relevant excerpts from the valuation reports,
issued by the appointed valuers. Therefore, the submission that
the value of preference shares has not been included in calculating
the liquidation value of the Corporate Debtor is factually incorrect.
[Para 18][962-C-G; 964-B-C]
3.2 As regards the liquidation value, it has been clarified
that the liquidation value due to the unsecured operational
creditors would remain nil in all scenarios, including if the corpus
of Rs 800 crores is separately considered. The liquidation value
of the Corporate Debtor is Rs 4339.58 crores. 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 has been clarified that even if the liquidation value of the
realisable value of the preference shares were to be considered
in isolation for distribution amongst all the operational creditors,
in terms of the priority contained in Section 53(1), the liquidation
value due to the appellants would still remain at nil. [Para 19][964C-F]
3.3 As regards the order of the NCLT in Doha Bank
proceedings, the order of the NCLT in the application which was
moved by Doha Bank for the removal of certain financial creditors
from the CoC, has no bearing on the status of the approval of the
resolution plan for the reason that it had received a unanimous
approval with the 100 per cent voting share in the CoC. The
exclusion of certain financial debts and hence, the exclusion of
certain financial creditors from the CoC, pursuant to the order of
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF
RELIANCE INFRATEL LTD.
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[2021] 8 S.C.R.
the NCLT in the Doha Bank proceedings, has no practical
implication since the resolution plan continues to be approved
with a 100 per cent majority even after their exclusion. The order
of the NCLT in the Doha Bank proceedings did not provide for
the inclusion of any new financial creditors. The consequence of
the Doha Bank order would be that the inter se distribution
between the financial creditors would be affected, which has no
consequence for the operational creditors. In the affidavit which
has been filed by the Monitoring Committee in pursuance to the
order of the 10 March 2021 of this Court, it has also been stated
so.[Para 20, 21][964-F-H; 965-A-B]
Case Law Reference
[2019] 3 SCR 535
relied on
Para 11
[2019] 16 SCR 275
relied on
Para 34, 37, 38
[2019] 3 SCR 845
relied on
Para 31, 34
[1978] 2 SCR 621
referred to
Para 41
CIVIL APPELLATE JURISDICTION: Civil Appeal No.676 of
2021.
From the Judgment and Order dated 04.01.2021 of the National
Company Law Appellate Tribunal, New Delhi in CA (AT) (Ins) No.1134
of 2020.
Dushyant Dave, Sr. Adv., Rajat Sehgal, Tapan Masta,
Mrs. Vandana Anand, Gautam Swarup, Mandavya Kapoor, Kartikeya
Jaiswal, Ms. Gunjan Jindal, Advs. for the Appellants.
Neeraj Kishan Kaul, Sr. Adv., Saurav Panda, Vaijayant Paliwal,
Ms. Charu Bansal, Ms. Prabh Simrran Kaur, Ms. Ankita Mandal, S. S.
Shroff, Advs. for the Respondents.
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The Judgment of the Court was delivered by
DR JUSTICE DHANANJAYA Y CHANDRACHUD, J.
Index
A The Appeal
B Corporate Resolution Insolvency Process
C Approval of Resolution Plan
D Challenge before Appellate Tribunal
E Submissions
F Analysis
 F.1 Clearing the ground
 F.2 Jurisdiction to approve a Resolution Plan
 F.3 Exercise of jurisdiction
G Conclusion
A The Appeal
1. This appeal arises under Section 62 of the Insolvency and
Bankruptcy Code1, against a judgment the dated 4 January 2021 of the
National Company Law Appellate Tribunal2. Reliance Infratel Limited3
is the corporate debtor. The appellants are operational creditors. By its
order dated 3 December 2020, the National Company Law Tribunal,
Mumbai4, approved the resolution plan formulated in the course of the
insolvency resolution process5 of the Corporate Debtor. The NCLAT
has upheld the order.
B Corporate Resolution Insolvency Process
2. The CIRPof the Corporate Debtor was initiated by an order
dated 15 May 2018 of the NCLT. An interim resolution professional6
was appointed on 18 May 2018. The IRP issued a public announcement
1 IBC
2 NCLAT/Appellate Authority
3 RIL
4 NCLT/Adjudicating Authority
5 CIRP
6 IRP
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF
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[2021] 8 S.C.R.
on 21 May 2018 inviting claims from the creditors of the Corporate
Debtor. The order of the NCLT admitting the corporate debtor to the
CIRP was challenged in appeal, and the order of admission was stayed
on 30 May 2018. On 30 April 2019, the NCLAT vacated the stay on the
CIRP.The appeal was withdrawn.
3. The CIRP resumed on 7 May 2019. A fresh public
announcement was issued by the IRP on 7 May 2019 for inviting claims
from creditors.The Committee of Creditors7 was constituted on 24 May
2019. On 30 May 2019, the CoC replaced the IRP with Mr. Anish Niranjan
Nanavaty as the Resolution Professional8. This appointment was
confirmed by the NCLT on 21 June 2019.
4. During the course of the process, the RP invited 'Expressions
of Interest'9 from prospective resolution applicants on 15 July 2019.
Fifteen EOIs were received, and a provisional list was prepared and
furnished to the CoC on 16 August 2019. A request for resolution plan10
was then issued to the prospective resolution applicants on 21 August
2019, together with an information memorandum and evaluation matrix.
With the consent of the CoC, the last date for submission of resolution
plans was extended till 25 November 2019. The RP received resolution
plans from the four prospective resolution applicants:
a) Bharti Airtel Ltd.;
b) Reliance Digital Platform & Project ServicesLimited, through
 its division Infrastructure Projects;
c) VFSI Holdings Pte. Ltd.; and
d) UV Asset Construction Company Ltd.
5. The CoC engaged with the prospective resolution applicants
between 2 January 2020 and 2 March 2020, in pursuance of which revised
resolution plans were submitted. At the 16th meeting of the CoC held on
9 January 2020 (reconvened on 13 January 2020), further discussions
were held and the resolution plan submitted by Reliance Digital Platform
7 CoC
8 RP
9 EOI
10 RFRP
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and Project Services Limited11 was taken forward as a preferred resolution
plan on the basis of its "feasibility, viability and implementability". The
Resolution Applicant submitted a revised resolution plan on 13 January
2020, and upon due verification of its eligibility under Section 29A of the
IBC, was declared a successful resolution applicant at the 19th meeting
of the CoC held on 2 March 2020. The resolution plan was approved
with a 100 per cent voting share of the CoC. A letter of intent ("LoI")
was then issued by the RP on 4 March 2020, which the Resolution
Applicant unconditionally accepted on 6 March 2020.
6. The NCLT has indicated the following extensions which were
granted, consistent with the provisions of the IBC, for completing the
CIRP:
"5...
i The period of stay between 30.05.2018 and 30.04.2019 was
excluded from the calculation of the CIRP vide order dated
09.05.2019.
ii. Extension of 90 days was granted vide order dated 29.09.2019.
TheCIRP thus stood extended from 12.10.2019 to 10.01.2020.
iii. Further exclusion of 24 days was granted from the CIRP period
videorder dated 07.01.2020, owing to time spent in litigation from
the date of approval of the Applicant as RP till the date of
publication of orderconfirming the said appointment.
iv. It was clarified by order dated 24.01.2020 that the RP and the
CoC wereat liberty to complete CIRP within 330 days, which
was expiring on10.03.2020."
C Approval of Resolution Plan
7. An application was submitted under Section 30(6) of the IBC
by the RP, seeking the approval of the resolution plan by the NCLT. The
NCLT discussed the salient aspects of the resolution plan in the course
of its order on the approval application. The financial terms envisaged in
the resolution plan have been tabulated thus:
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
11 the Resolution Applicant
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SUPREME COURT REPORTS
[2021] 8 S.C.R.
PART C
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PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
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The plan envisages the following payments for the insolvency
resolution of the Corporate Debtor as a going concern:
"G. Overall payment under the Plan:
Resolution Plan contemplates following payments for theinsolvency
resolution of the Corporate Debtor as a going concern:
Note-I to the table is as follows:
"Note 1:
Reliance Bhutan Limited (RBL)(wholly owned subsidiary of the
Corporate Debtor) holds preference shares in one of the other
group companies of Reliance Communications Group, i.e. Reliance
Realty Limited (RRL), which holds certain real estate assets. RA
provides that:
a.
In the event RRL is able to sell its real estate assets for an
amount of INR 800 Crore or more, the RA shall cause that
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amount of INR 800 Crore (less any taxes and transaction
costs) from the value realised from the preference shares
held by RBL in RRL to be distributed to the Approving
Financial Creditors on a pro rata basis to their Admitted
Financial Debt within 30 days of the completion of the sale
and all related approvals.
b.
In the event the amount expected to be realised from the
sale ofthe real estate assets of RRL is less than INR 800
Crore, the RA will purchase the real estate assets of RRL
for INR 800 Crore and said amount of INR 800 Crore (less
any taxes and transaction costs) shall be distributed to the
Approving Financial Creditors on a pro rata basis to their
Admitted Financial Debt, as would be mutually agreed
between the RA, RRL and the Approving Financial
Creditors."
8. In the course of deciding upon the approval plan, the NCLT
noted that Doha Bank, which was one of the financial creditors of the
Corporate Debtor, had instituted proceedings12 challenging the admission
of the claims of a few other creditors and a proceeding13 to impugn the
decision of the RP to recognize the indirect lenders of the Corporate
Debtor as financial creditors. The NCLT noted that the applications
were pending, but it came to the view that the pendency of these and
other applications would not stand in the way of the approval of the
resolution plan, particularly since it had been unanimously approved by
the CoC. However, it clarified that the distribution of payments to
creditors, financial or operational, shall be subject to the orders which
are passed in the interim applications, within the ambit of the IBC. In the
above backdrop, the NCLT by its order dated 3 December 2020 approved
the resolution plan in terms of the following directions:
"14. In view of the discussions and the law thus settled, the instant
Resolution Plan meets the requirements of Section 30(2) of the
Code and Regulations 37, 38, 38(1A) and 39(4) of the Regulations.
The Resolution Plan is not in contravention of any of the provisions
of Section 29A of the Code and is inaccordance with law. The
same needs to be approved.
12 IA 1960 of 2019
13 IA 3055 of 2019
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
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[2021] 8 S.C.R.
15. Doha Bank one of the Financial Creditors has filed IA No.
1960 of 2019 inter alia, challenging the admission of claims of few
other Creditors and IA No. 3055 of 2019 impugning the decision
of the Resolution Professional recognising the Indirect Lenders
of the Corporate Debtor as Financial Creditors. The Applications
are pending consideration. We are of the considered opinion that
pendency of these and other Applications would not come in the
way of approval or otherwise of the Resolution Plan. More so,
when the Resolution Plan has been unanimously approved by the
CoC. The distribution of the payments to the Creditors, Financial
or Operational, as the case may be, shall be subject to orders to
be passed in the respective Interim Applications within the ambit
of the Code. We are thus inclined to dispose of this Application in
the following terms. Hence ordered.
ORDER
i.
The Application be and the same is allowed. The Resolution
Plan submitted by Reliance Digital Platform & Project
Services Limited through its division Infrastructure Projects
annexed to the Application is hereby approved. It shall
become effective from this date and shall form part of this
order. It shall be binding on the Corporate Debtor, its
employees, members, creditors, including the Central
Government, any State Government or any local authority
to whom a debt in respect of the payment of dues arising
under any law for the time being in force is due, guarantors
and other stakeholders involved in the Resolution Plan.
ii.
The distribution of the payments to the Financial Creditors
shall abide by and be subject to the orders passed in IA
Nos. 1960 of 2019 and 3055 of 2019 pending consideration
of this Bench. The amount sought to be infused by the
Resolution Applicant shall be kept in an interest bearing
deposit in any Nationalised Bank till disposal of the said
Applications.
iii.
The approval of the Resolution Plan shall not be construed
as waiver of any statutory obligations of the Corporate
Debtor and shall be dealt by the appropriate Authorities in
accordance with law. Any waiver sought in the Resolution
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Plan, shall be subject to approval by the Authorities
concerned.
iv.
The Memorandum of Association (MoA) and Articles of
Association (AoA) shall accordingly be amended and filed
with the Registrar of Companies (RoC), concerned for
information and record. The Resolution Applicant, for
effective implementation of the Plan, shall obtain all
necessary approvals, under any law for the time being in
force, within such period as may be prescribed.
v.
Henceforth, no creditors of the erstwhile Corporate Debtor
can claim anything other than the liabilities referred to in
Para 6 supra.
vi.
The moratorium under Section 14 of the Code shall cease
to have effectfrom this date.
vii.
The Applicant and the Monitoring Committee shall supervise
the implementation of the Resolution Plan and the Applicant
shall file status of its implementation before this Authority
from time to time, preferably every quarter.
viii.
The Applicant shall forward all records relating to the
conduct of the CIRP and the Resolution Plan to the IBBI
along with copy of this Orderfor information...."
D Challenge before Appellate Tribunal
9. The appellants challenged the decision of the NCLT approving
the resolution plan in appeal before the NCLAT. The grounds of challenge
of the appellants were:
(i)
The appellants were kept unaware of the CIRP and no
details were provided by the RP as regards the disposal of
the fund towards their claims;
(ii)
The claims of the appellants had not received a fair and
equitable treatment;
(iii)
The fair marketvalue and the liquidation value of the
Corporate Debtor had not been taken into account and an
amount of Rs 800 crores, being the value of certain
preference shares, did not form a part of the corpus of
payments to the operational creditors;
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
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SUPREME COURT REPORTS
[2021] 8 S.C.R.
(iv)
There were material irregularities in the accumulation and
disbursal of funds that constituted the corpus of the corporate
debtor; and
(v)
The appellants were made to suffer a reduction of 90 per
cent of their total claims,while substantial claims of nearly
Rs 120 crores have been rejected.
10. The NCLAT by its judgment dated 4 January 2021 rejected
the appeal. The NCLAT noted that there was no substance in the
grievance that the operational creditors had been unfairly or inequitably
treated in regard to the distribution of funds. As a matter of fact,
operational creditors (other than related parties and statutory creditors)
were allocated 19.62 per cent of the up-front payment of Rs 3720 crores,
while the financial creditors were paid only an amount of 10.32 per cent
of the upfront payment. The approved resolution plan, the NCLAT
observed, ensures restructuring and revival of the corporate debtor.
11. The appellants were not excluded from the CIRP as they had
filed their claims, which had been partly admitted. In dealing with the
submission that there was an absence of equitable treatment of the
operational creditors, the NCLAT held that equitable treatment can be
claimed only by similarly situated creditors. Operational creditors stand
on a different footing as compared to financial creditors. They are entitled
to receive payment not less than liquidation value, which does not apply
to financial creditors. In this backdrop, the NCLAT relied upon the
decisions of this Court in Swiss Ribbons (P) Ltd. vs Union of India14
("Swiss Ribbons") and Committee of Creditors of Essar Steel
India Limited vsSatish Kumar Gupta15 ("Essar Steel India
Limited"). Finally,the NCLAT did not find substance in the grievance
in regard to the preferential shares. It held that the distribution mechanism
conforms to the provisions of Section 53 and was in accordance with
the provisions of the IBC. The appeal was accordingly dismissed.
E Submissions
12. When the present appeal came up on 10 March 2021, this
Court noted the submission of the learned Senior Counsel that as a
consequence of the order of the NCLT of 2 March 2021, certain entities
which were recognized as financial creditors in the resolution plan have
14 (2019) 4 SCC 17
15 (2020) 8 SCC 531
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been de-recognized as financial creditors. The issue, then, was whether
this decision would have any bearing on the requisite majority required
to pass a resolution plan. The Court noted the submission of Senior
Counsel for the Monitoring Committee, that the resolution plan has been
approved by 100 per cent of the voting shares and the exclusion of some
financial creditors from the CoC would be of no consequence. However,
since the issue had been raised during the course of the submission, by
an order dated 10 March 2021, opportunities were granted to the parties
to file affidavits explaining the position. Affidavits have accordingly been
exchanged between the parties, to which a reference would be made. It
is in this backdrop that the appeal has been heard finally at this stage.
13. Mr Dushyant Dave, learned Senior Counsel has appeared on
behalf of the appellants. Mr Neeraj Kishan Kaul, learned Senior Counsel
addressed the submissions on behalf of the Monitoring Committee.
14. Mr Dushyant Dave, learned Senior Counsel, submitted on
behalf of the appellants that:
(i)
The stated object and purpose of the IBC is to balance the
interest of all stakeholders and to maximize the value of
assets. The long title to the IBC elucidates that the legislation
seeks to:
"... consolidate and amend the laws relating to
reorganization and insolvency resolution of corporate
persons, partnership firms and individuals in a time-bound
manner for maximization of value of assets of such
persons, to promote entrepreneurship, availability of
credit and balance the interests of all the stakeholders
including alteration in the order of priority of payment of
Government dues and to establish an Insolvency and
Bankruptcy Board of India."
(ii)
The CIRP must be just, fair and equitable to all stakeholders,
and cannot place the interest of the financial creditors at a
higher pedestal at the cost of other stakeholders. In the
present case, the operational creditors are small and medium
scale companies who have supplied goods and services to
the Corporate Debtor andtheir interests have not been taken
into consideration;
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]
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(iii)
The CIRP has been conducted in a secretive manner, in
violation of the principles of natural justice and there has
been an absence of information to the operational creditors
in regard to the contentsof the resolution plan. As a result,
it was only after an order approving the resolution plan was
passed by the Adjudicating Authority, that the appellant
became aware of the specifics of the resolution plan;
(iv)
The appellants are telecom service providers of the
Corporate Debtor.The total operational debt owed to them
amounts to Rs 190.40 crores (approx.), constituting over
90 per cent of the total operational debts of the Corporate
Debtor. These operational creditors have provided core
service in the nature of operation and maintenance of
telecom towers and the optical fiber network and associated
passive infrastructure equipment. The interest of the
operational creditors, who are small and medium size
companies, have not been borne in mind by the CoC by
placing certain assets of the Corporate Debtor outside the
resolution amount. The assets of the Corporate Debtor, held
directly or indirectly through subsidiaries, should be available
for distribution to all stakeholders;
(v)
The resolution plan segregates and reserves a portion of
the Corporate Debtor's assets amounting to Rs 800 crores
for distribution to certain financial creditors alone, despite
there being no specific charge on such sums in their favor.
This vitiates the object of the IBC which is to maximize the
value of the assets of the Corporate Debtor and balance
the interest of all stakeholders;
(vi)
The resolution plan has reserved a sum of Rs 800 crores
exclusively for distribution to the financial creditors, and
the said amount does not form a part of the total resolution
amount of Rs 3720 crores being paid by the resolution
applicant to acquire the Corporate Debtor. This sum of Rs
800 crores is realizable from the preference shares held by
Reliance Bhutan Limited, a wholly owned subsidiary of the
Corporate Debtor in Reliance Reality Limited. On the other
hand, if Reliance Realty Limited is unable to sell such real
estate assets for Rs 800 crores or more, the Resolution
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Applicant would itself buy such assets for Rs 800 crores
and make such funds available for distribution to the specified
financial creditors. In apportionment, a sale of Rs 800 crores
exclusively for the benefit of specified financial creditorsis
a violation of Section 30(2)(b) of the IBC;
(vii)
The NCLT on an application filed by Doha Bank, a financial
creditor of the Corporate Debtor,by its order dated 2 March
2021, set aside the inclusion of these banks (State Bank of
India, Bank of India, UCO Bank, Syndicate Bank, Oriental
Bank of Commerce and Indian Overseas Bank) from the
CoC.