The NCLAT, while laying down the law on this issue, held that the objective of the I&B Code is resolution and its purpose is for the maximisation of the value of assets of the corporate debtor and thereby for all the creditors. It is not the maximisation of value for a ‘stakeholder’ or a 'set of stakeholders' such as creditors and is to promote entrepreneurship, availability of credit and balance the interests.
In the instant case titled Binani industries ltd v bank of Baroda anr two issues were raised before the NCLAT for clarification:
Whether the Committee of Creditors discriminated between the eligible Resolution Applicants while considering the Resolution Plan of Rajputana Properties Private Limited?
Whether the Resolution Plan submitted by Rajputana Properties Private Limited was discriminatory and in contravention of the provisions of the I&B Code?
With regard to the first issue, NCLAT held that all the 'Resolution Plans' which meet the requirements of Section 30(2) of the IBC are required to be placed before the COC and the RP can review the 'Resolution Plan' and the 'Committee of Creditors' is entitled to negotiate and modify with the consent of the 'Resolution Applicant'. To apply this clause there is no time limit prescribed except that the 'Resolution Process' should be completed within 180 days or a maximum of 270 days.
It was further observed that "Non-application of mind by the COC and discriminatory behaviour in approving the plan submitted by the 'Rajputana Properties Private Limited' is apparent.
With regard to the second issue, it was held that the main objective of the Code is of reorganisation and insolvency resolution of corporate persons in a time-bound manner for maximisation of value of assets of such persons to promote entrepreneurship, availability of credit and balance the interest of all stakeholders.
The Resolution Plan is not a sale, not an action or recovery and is neither in liquidation. The Resolution Plan submitted by the Rajputana properties was discriminatory in its very essence and was also against the Code of I&B. Discrimination was catered on the ground that some of the "Financial Creditors" were direct exposure to the "Corporate Debtor" or some of the "Financial Creditors" to whom the "Corporate Debtor" was the guarantor.
Therefore, the NCLAT held that the Resolution Plan submitted by Rajputana Properties Pvt. Ltd was discriminatory and contrary to the scheme of the I&B Code and while rejecting the same, directed the COC to consider other Resolution plans including the revised plan submitted by Ultratech Cement Ltd.
The court categorically held that:
“Both kinds of credits need to be on a level playing field. ‘Operational Creditors’ need to provide goods and services. If they are not treated well or discriminated against, they will not provide goods and services on credit. The objective of promoting the availability of credit will be defeated.”