NCLT-approved RP Offering 2.16% Payment to OC, Rest via Preference Shares Was Violative of Sec. 30 | NCLAT

  • News|Blog|Insolvency and Bankruptcy Code|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 19 April, 2024

resolution plan

Case Details: Gupta Textiles v. Darshan Patel - [2024] 161 503 (NCLAT-New Delhi)

Judiciary and Counsel Details

    • Ashok Bhushan, Chairperson, Barun Mitra & Arun Baroka, Technical Member
    • Nipun Gautam, Adv. for the Appellant.
    • Navin Pahwa, Sr. Adv. & Karan Valecha, Adv. for the Respondent.
    • Kamil Lokhandwala, Ld. Counsel Darshan Patel, Nausher Kohli, Rakesh GuptaDeeraj Garg, Ld. Counsel for the Applicant.

Facts of the Case

In the instant case, the CIRP against the corporate debtor was commenced. The appellant (i.e. operational creditor) filed its claim for an amount of Rs.1.41 crores and the same was admitted to the extent of Rs.1.24 crores. Subsequently, the resolution plan submitted by respondent No.2 was approved and the resolution professional (RP) submitted an application for the approval of the resolution plan. The Adjudicating Authority (NCLT) approved the resolution plan.

The appellant challenged the NCLT’s order on the ground that the total claim of the operational creditor was admitted as Rs. 16.36 crores, however, the amount proposed to the operational creditor was Rs.35.34 lacs i.e., 2.16% as a cash payment. Therefore, the resolution plan submitted by respondent No.2 was not in compliance with section 30, sub-section (2) (b) of the IBC.


The NCLAT noted that the amount of the resolution plan was to be distributed on a pro-rata basis to operational creditors, whereas the cash amount offered to the operational creditor was only 2.16%. The rest amount, which was payable to the operational creditor as per section 30(2) (b) was to be subsumed by offering an option of partly paid redeemable preference shares.

The NCLAT, further noted that the amount to be paid to the financial creditor had to be paid in priority only by way of cash payment and not by way of issuing equity. Hence, the payment offered to the operational creditor was not in accordance with section 30 (2)(b) (ii) of the IBC.

The NCLAT held that the NCLT had failed to advert to section 30(2)(b)(ii) and failed to notice that the amount proposed to the operational creditor was clearly contrary to section 30(2)(b)(ii) of the IBC. Thus, the impugned order passed by the NCLT approving the resolution plan could not be sustained.

The NCLAT, further held that section 30 of the IBC provides that the operational creditor has to be paid a higher amount out of the amount as provided in sections 30(2)(b)(i) and 30(2)(b)(ii) of the IBC.

List of Cases Reviewed

    • NCLT (MUMBAI), in IA No.3908/2023in C.P. (IB)/4002(MB)2019, dated 09.11.2023
    • Jaypee Kenisington and Ors. (para 8) v. NBCC (India) Ltd. & Ors. – (2022) 1 SCC 401 (para 8) followed

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Leave a Reply

Your email address will not be published. Required fields are marked *

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied