NCLAT upholds NCLT order on distribution of funds from a resolution plan
GS3Economy · S&T · Environment · Security· Capital markets & SEBI· Mains·
Why in news
The NCLAT upheld an NCLT order regarding the distribution of funds to dissenting financial creditors (SBI and PNB) in a resolution plan, affirming the CoC's approved mechanism.
Background
The National Company Law Appellate Tribunal (NCLAT) dismissed an appeal by five banks against the distribution of funds to SBI and Punjab National Bank. The tribunal ruled that the distribution followed Section 30(2)(b) of the Insolvency and Bankruptcy Code (IBC) and enforced the pre-determined liquidation value.
Facts for Prelims
- BodyNCLAT: National Company Law Appellate Tribunal
- BodyNCLT: National Company Law Tribunal
- FactSection 30(2)(b) of the IBC governs the distribution of funds in a resolution plan
- BodyCoC: Committee of Creditors, the primary body for approving resolution plans
For Mains
Q. Examine the role of the Committee of Creditors (CoC) in ensuring equitable distribution of funds during the corporate insolvency resolution process under the IBC.
Dimensions to cover in your answer
- Creditor rights: Balancing the interests of dissenting financial creditors against the majority CoC consensus
- Liquidation value: Ensuring resolution plans provide better recovery than the predetermined liquidation value
- Judicial oversight: The role of NCLT/NCLAT in preventing undue benefits during insolvency proceedings
Keywords: Insolvency and Bankruptcy Code · Committee of Creditors · Liquidation Value · Resolution Plan · Financial Creditors
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