Liquidation Value vis a vis Dissenting Financial Creditors: Aftermath Of Maharashtra Seamless And Orchid Pharma

The Insolvency Bankruptcy Code, 2016 has gone through a myriad of changes since its inception and introduction. The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan— provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section of section 53 in the event of a liquidation of the corporate debtor. Therefore, although certain financial creditors did not vote in favour of the resolution plan, which was prior to the amendment in the above case, in view of meeting the requirements of Explanation 2 to the amended Section 30, they would be entitled to claim a minimum of the liquidation value. This would hence, have more significance to the dissenting financial creditors, considering that the resolution plan value, in the said case, was much lesser than the liquidation value. In fact, although it has been made clear that Section 30 would operate retrospectively, provided a case meets the requirement of Explanation 2, as in the case of Orchid Pharma, the Supreme Court in Essar could, however, not go into the retrospective application of Regulation 38, which most importantly provides for the priority in distribution of the amounts from the resolution plan amongst the various stakeholders, most importantly, which includes the financial creditors who voted against the plan.