The National Company Law Appellate Tribunal (NCLAT) has dismissed a joint petition filed by Indian Bank, UCO Bank, Bank of Baroda, ICICI Bank and Union Bank of India, which had challenged the distribution of funds to dissenting financial creditors State Bank of India and Punjab National Bank in the insolvency resolution of OCL Iron and Steel.
A two-member bench of the tribunal held that the distribution mechanism under the resolution plan was valid and legally binding. It observed that the allocation of funds had already been approved by the Committee of Creditors (CoC) using its commercial judgement and was later confirmed by the National Company Law Tribunal (NCLT). The appellate tribunal stated that the Monitoring Committee, formed after completion of the bidding process, did not have the authority to alter the approved distribution framework.
The bench, comprising Justice Ashok Bhushan and technical member Indevar Pandey, noted that the payment made to State Bank of India was in line with provisions of Section 30(2)(b) read with Section 53(1) of the Insolvency and Bankruptcy Code. It added that the approved plan did not show any unfairness or legal violation.
The matter relates to the corporate insolvency resolution process of OCL Iron and Steel, where the Cuttack bench of the NCLT had earlier approved a resolution plan submitted by Indrani Patnaik. The insolvency process had been initiated in September 2021, following which claims were consolidated and a nine-member Committee of Creditors was formed.
The CoC included Asia Opportunities (III) Mauritius Limited with the highest voting share of 36.22 per cent, followed by ICICI Bank, State Bank of India, Indian Bank, UCO Bank, Bank of Baroda, Union Bank of India, Punjab National Bank and Ganesh Ores. The resolution plan was approved by an 88.98 per cent majority, reflecting strong creditor support.
After approval of the plan, a Monitoring Committee was set up to supervise implementation. However, disagreements arose in subsequent meetings regarding the distribution of funds to dissenting financial creditors. The issue became more prominent after Indrani Patnaik, as the successful resolution applicant, transferred INR 35.20 crore to State Bank of India as part of the resolution payout.
State Bank of India later approached the NCLT seeking to set aside the distribution method adopted in one of the Monitoring Committee meetings. The tribunal directed that payments to dissenting creditors be made strictly as per the provisions of the Code and based on liquidation value calculations verified by the evaluation advisor.
Challenging this direction, the five banks approached the appellate tribunal. However, the NCLAT clarified that the earlier order did not grant any extra benefit to State Bank of India and only ensured enforcement of the already approved liquidation value.
This ruling aligns with earlier judicial interpretations under the Insolvency and Bankruptcy Code, where courts have consistently upheld the primacy of the Committee of Creditors commercial decisions while also protecting the statutory rights of dissenting creditors. The decision reinforces the principle that once a resolution plan is approved, subsequent bodies cannot modify its core financial structure.
Source PTI