Financial Creditors initiated Corporate Insolvency Resolution Process (CIRP) against a corporate debtor and invited the expression of interest (EOI) of Resolution Plan from the eligible persons. One company, showed inter

Eligibility of Resolution Applicant and Distribution to Operational Creditors: Yes, the Resolution Applicant will be succeeded in the NCLAT. The facts of the case are similar to that of the case of acquisition of Bhushan Steel Ltd by Bamnipal Steel Ltd (BNL), a subsidiary of Tata Steel Ltd, which is as under: The acquisition of Bhushan Steel Ltd (BSL) for ₹35,200 crore by Bamnipal Steel Ltd (BNL), a subsidiary of Tata Steel Ltd. in May 2018, has been the first major case of acquisition of a major stressed asset under the Insolvency and Bankruptcy Code. BNL completed the acquisition of controlling stake of 72.65 per cent in BSL in accordance with the approved resolution plan under the Corporate Insolvency Resolution Process (CIRP) of the IBC. Tata Steel has paid ₹35,200 crore in cash to acquire Bhushan Steel. It would pay another ₹1,200 crore over next 12 months to operational creditors. The promoters of BSL approached the National Company Law Appellate Tribunal (NCLAT) over issue of ineligibility of Tata Steel to acquire BSL. L&T, an operational creditor also approached the Hon'ble NCLAT over issue of unfair distribution of settlement amount for its claim under the provisions of IBC, 2016. NCLAT upheld the acquisition of Bhushan Steel, rejecting allegations of its ineligibility by the promoters of the company. The NCLAT also rejected the claims of L&T, an operational creditor of Bhushan Steel Ltd, opposing Tata Steel's resolution plan seeking a higher priority in debt settlement. Regarding Eligibility of Resolution Applicant (Section 29A(d)): The NCLAT said that Tata Steel UK, a foreign subsidiary of Tata Steel, which was fined by an English Court in February 2018 under UK Act, had a provision of 'imprisonment for a term not exceeding twelve months, or a fine, or both'. While, the provision in section 29A(d) of the Code, which deals with eligibility, stipulates "has been convicted for any offence punishable with imprisonment for two years or more", cannot be equated with Section 33(1)(a) of the U.K Act, said NCLAT. Section 29A of the IBC mandates that a person convicted for any offences punishable with imprisonment for two years or more is ineligible for submitting a resolution plan. In the given case, the subsidiary company in the UK was fined under UK Act which provides for imprisonment for a term not exceeding 12 months or a fine or both. Since Section 29A(d) requires imprisonment for 'two years or more', a conviction leading to imprisonment not exceeding 12 months (or a fine) does not render the Resolution Applicant ineligible under this specific clause of the IBC. Therefore, the Resolution Applicant was eligible to submit the Resolution Plan. Regarding Unfair Distribution to Operational Creditors: Over the claims of L&T, which had supplied goods and machineries over ₹900 crore, NCLAT said that Tata Steel's resolution plan was fair towards operational creditors of Bhushan Steel which has a total demand of ₹1,422 crore. The NCLAT observed that the company has allotted ₹1,200 crore for them and L&T plea for a higher priority could not be accepted. Moreover, it also declined the plea of the promoters family, contending Tata Steel's Resolution Plan' was illegal as it purports to transfer shares' of the 'preference shareholders' of Bhushan Steel without their consent for a fixed consideration of ₹100 as against ₹2,269 crore. In the given case, the payment to operational creditors in instalments over 12 months, as agreed in the Resolution Plan, would be assessed based on whether it meets the minimum requirements under Section 30(2) of the IBC, which ensures that operational creditors receive at least the amount they would have received in liquidation. If this condition is met, the distribution is generally considered fair under the IBC framework, even if it is in instalments.