Holding

The resolution plan was validly approved as it complied with the statutory requirements of the IBC, and the adjudicating and appellate authorities have no equity‑based jurisdiction to interfere with the CoC’s commercial decision; equitable treatment is confined to similarly situated creditors.

Summary

The operational creditors (Pratap Technocrats and others) challenged the NCLT's approval of a resolution plan for Reliance Infratel Ltd., alleging that they were not given fair and equitable treatment and that the plan improperly excluded certain financial creditors and omitted the value of preference shares from the liquidation value. The NCLAT upheld the NCLT order, and the Supreme Court examined whether the adjudicating and appellate authorities could interfere with the Committee of Creditors' (CoC) commercial wisdom. The Court held that the CoC’s decision to approve the plan, which satisfied the statutory requirements of Section 30(2) of the IBC, is not justiciable and that equitable treatment applies only within the same class of creditors. It further clarified that the value of the preference shares was correctly included in the liquidation value and that the exclusion of some financial creditors did not affect the plan’s validity, which was approved by a 100% voting share of the CoC. Consequently, the Supreme Court dismissed the appeal, confirming the plan’s approval.

Issues considered

The adequacy of fair and equitable treatment for operational creditors under Section 30(2)(b) of the IBC
Whether the NCLT/NCLAT have jurisdiction to review the commercial wisdom of the CoC in approving a resolution plan
The effect of excluding certain financial creditors from the CoC on the validity of a plan approved with 100% voting share
The inclusion of the realisable value of preference shares in the liquidation value of the corporate debtor
The compliance of the resolution plan with the statutory requirements of Sections 30 and 31 of the IBC

Legislation cited

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016s. Regulation 27, s. Regulation 35
Insolvency and Bankruptcy Code, 2016s. 30(1), s. 30(2), s. 30(4), s. 31, s. 5(20), s. 5(21), s. 53, s. 5(7), s. 5(8), s. 61(3)

Subjects

insolvencycorporate insolvency resolution processresolution planfair and equitable treatmentCommittee of CreditorsNCLTNCLATIBCequity jurisdictionoperational creditorsfinancial creditorsliquidation value

Judgment

938 [2021]REPORTS
SUPREME COURT 8 S.C.R. 938 [2021] 8 S.C.R.

A PRATAP TECHNOCRATS (P) LTD. & ORS.
v.
MONITORING COMMITTEE OF RELIANCE INFRATEL
LIMITED & ANR.
B (Civil Appeal No 676 of 2021)
AUGUST 10, 2021
[DR DHANANJAYA Y CHANDRACHUD AND
M R SHAH, JJ.]
Insolvency and Bankruptcy Code, 2016:
C
ss. 30(1), 30(2), 31, 53 –Corporate Insolvency Resolution
Process (CIRP) – Approval of resolution plan – Initiation of CIRP
of Corporate Debtor – Resolution applicant declared successful –
Resolution plan approved with 100 per cent voting share of the
Committee of Creditors(CoC) and subsequently approved by NCLT
D – Appellants-Operational creditors challenged the order of NCLT
approving the resolution plan on the ground that the claim of the
appellants had not received a fair and equitable treatment – NCLAT
upheld the order of NCLT holding that the equitable treatment can
be claimed only by similarly situated creditors – On appeal, held:
E Decision to approve a resolution plan is entrusted to the CoC –
Jurisdiction of the Adjudicating Authority and the Appellate
Authority cannot extend into entering upon merits of a business
decision made by a requisite majority of the CoC in its commercial
wisdom – Nor there is a residual equity based jurisdiction in the
Authorities to interfere in the decision of CoC – Commercial wisdom
F of the CoC in its collegial capacity is, thus, not justiciable –
Equitable treatment of creditors is equitable treatment only within
the same class – Financial creditors belong to a class distinct from
operational creditors – Fair and equitable‘ norm does not mean
that financial and operational creditors must be paid the same
G amounts in any resolution plan before it can pass muster – On facts,
resolution plan duly approved by a requisite majority of the CoC in
conformity with s. 30(4) – Exclusion of some of the financial creditors
from the CoC of no consequence, once the plan approved by a 100
per cent voting share of the CoC – Furthermore, value of preference
shares included in calculating the liquidation value of the Corporate
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Debtor; and that the liquidation value due to the unsecured A
operational creditors would remain nil – Jurisdiction of the
Adjudicating Authority was confined by the provisions of s. 31(1)
to determine whether the requirements of s. 30(2) have been fulfilled
in the plan as approved by the CoC – Thus, the decisions of NCLT
and NCLAT in conformity with law.
B
ss. 31(1), 30(2) – Resolution plan – Approval by Committee
of Creditors – Jurisdiction of NCLT and NCLAT – Held: Under the
provisions of IBC, neither the Adjudicating Authority-NCLT nor the
Appellate Authority-NCLAT have an unchartered jurisdiction in
equity – Jurisdiction arises within and as a product of a statutory
framework. C
Purpose and objective of – Held: IBC is a complete code in
itself – It defines fair and equitable treatment by constituting a
comprehensive framework within which the actors partake in the
insolvency process – Process envisaged by the IBC is a direct
representation of certain economic goals of the Indian economy – D
To submit that a residuary jurisdiction must be exercised to alter the
delicate economic coordination envisaged by the statute, would do
violence on its purpose and would be an impermissible exercise of
the Adjudicating Authority‘s power of judicial review – Thus, once
the requirements of the IBC have been fulfilled, the Adjudicating
Authority and the Appellate Authority duty bound to abide the E
statutory provisions.
Insolvency and Bankruptcy laws: Resolution/reorganization
plans – Challenge to, on the grounds of fairness and equity by
foreign jurisdictions vis-a-vis Indian insolvency regime – Discussed
– United Kingdom‘s Insolvency Act, 1986 – United States‘ US F
Bankruptcy Code – Indian Insolvency and Bankruptcy Code, 2016.
Dismissing the appeal, the Court
HELD:1.1 The resolution plan was approved by the CoC,
in compliance with the provisions of the IBC. The jurisdiction of
the Adjudicating Authority under Section 31(1) of the IBC is to G
determine whether the resolution plan, as approved by the CoC,
complies with the requirements of Section 30(2). The NCLT is
within its jurisdiction in approving a resolution plan which accords
with the IBC. There is no equity-based jurisdiction with the NCLT,
under the provisions of the IBC. [Para 22][965-E-F]
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940 SUPREME COURT REPORTS [2021] 8 S.C.R.

A 1.2 Section 30(1) envisages the submission of a resolution
plan by a resolution applicant. On the submission of the resolution
plan, the Resolution Professional is required to examine it and
to confirm, in terms of sub-Section (2) of Section 30, that the plan
abides by the statutory requirements spelt out in clauses (a) to
(f). The RP has to present to the CoC, for its approval, such
B
resolution plans which conform to the conditions specified in
sub-Section (2) of Section 30. The approval of the resolution plan
is a statutory function which is entrusted to the CoC, under
sub-Section (4) of Section 30. The CoC may approve a resolution
plan with a voting percentage of not less 66 per cent of the voting
C shares of financial creditors after considering its feasibility and
viability; the manner of distribution proposed having regard to
the order of priority amongst creditors laid down in Section 53(1)
of the IBC, including priority and value of the security interest of
the secured creditors; and such other requirements as may be
specified by the Insolvency and Bankruptcy Board of India. In
D
other words, the decision to approve a resolution plan is entrusted
to the CoC. [Para 23, 24][965-G-H; 966-A-C]
1.3 The function of the Adjudicating Authority under Section
31 is to determine whether the resolution plan as approved by
the CoC under Section 30(4) meets the requirements under
E Section 30(2). If the Adjudicating Authority is satisfied that the
resolution plan, as approved, meets the requirements under
sub-Section (2) of Section 30, it shall by order approve the
resolution plan which shall then be binding on the Corporate
Debtor and all stakeholders, including those specifically spelt
F out. [Para 25][967-A-B]
1.4 The jurisdiction which has been conferred upon the
Adjudicating Authority in regard to the approval of a resolution
plan is statutorily structured by sub-Section (1) of Section 31.
The jurisdiction is limited to determining whether the
G requirements which are specified in sub-Section (2) of Section
30 have been fulfilled. This is a jurisdiction which is statutorily-
defined, recognised and conferred, and hence cannot be equated
with a jurisdiction in equity, that operates independently of the
provisions of the statute. The Adjudicating Authority as a body

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owing its existence to the statute, must abide by the nature and A
extent of its jurisdiction as defined in the statute itself. The
jurisdiction of the Appellate Authority under Section 61(3), while
considering an appeal against an order approving a resolution
plan under Section 31, is similarly structured on specified grounds.
[Para 26, 27][967-E-G]
B
1.5 There are specific requirements which have been spelt
out in sub-Section (2)(b) of Section 30, as regards the operational
creditors. The amount which is payable to the operational
creditors towards their debts must at least be either what is
provided in sub-clause (i) or sub-clause (ii) of clause (b), whichever
is higher. Sub clause (i) refers to the amount paid to the C
operational creditors in the event of a liquidation under Section
53. Sub-clause (ii) refers to the amount that would have been
paid to the operational creditors, if the amount to be distributed
under the resolution plan was distributed in accordance with the
order of priority under Section 53(1)(b), which provides for a D
waterfall mechanism. [Para 28][968-D; 969-A-B]
1.6 These provisions indicate that the ambit of the
Adjudicating Authority is to determine whether the amount that
is payable to the operational creditors under the resolution plan
is consistent with the above norms which have been stipulated in E
clause (b) of sub-clause (2) of Section 30. Significantly, Explanation-
1 to clause (b), which is clarificatory in nature, provides that a
distribution which is in accordance with the provisions of the
clause shall be fair and equitable to such creditors. Fair and
equitable treatment, in other words, is what is fair and equitable
between the operational creditors as a class, and not between F
different classes of creditors. The statute has indicated that once
the requirements of Section 30(2)(b) are fulfilled, the distribution
in accordance with its provisions is to be treated as fair and
equitable to the operational creditors. [Para 29][969-C-E]
1.7 The entitlement of the operational creditors being G
defined by sub-clause (b) of sub-section (2) of Section 30, the
clarification contained in Explanation-1 must apply. As such, as
long as the payment under the resolution plan is fair and equitable

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942 SUPREME COURT REPORTS [2021] 8 S.C.R.

A amongst the operational creditors as a class, it satisfies the
requirements of Section 30(2)(b). [Para 30][969-E-F]
1.8 The consistent principle of law is that neither the
Adjudicating Authority nor the Appellate Authority can enter into
the commercial wisdom underlying the approval granted by the
B CoC to the resolution plan. The commercial wisdom of the CoC
in its collegial capacity is, hence, not justiciable. [Para 31][970-
B-C]
1.9 Once the Adjudicating Authority is satisfied that the
CoC has applied its mind to the statutory requirements spelt out
C in sub-Section (2) of Section 30, it must then pass the resolution
plan. The equitable treatment of creditors is equitable treatment
only within the same class. Financial creditors belong to a class
distinct from operational creditors. The UNCITRAL Legislative
Guide makes it clear that equitable treatment is only of similarly
situated creditors. The fair and equitable‘ norm does not mean
D that financial and operational creditors must be paid the same
amounts in any resolution plan before it can pass muster. [Para
37, 38][973-G-H; 974-D]
1.10 The jurisdiction of the Adjudicating Authority and the
Appellate Authority cannot extend into entering upon merits of a
E business decision made by a requisite majority of the CoC in its
commercial wisdom. Nor is there a residual equity based
jurisdiction in the Adjudicating Authority or the Appellate
Authority to interfere in this decision, so long as it is otherwise
in conformity with the provisions of the IBC and the Regulations
F under the enactment. [Para 39][975-B-C]
1.11 Certain foreign jurisdictions allow resolution/
reorganization plans to be challenged on grounds of fairness and
equity. One of the grounds under which a company voluntary
arrangement can be challenged under the United Kingdom‘s
G Insolvency Act, 1986 is that it unfairly prejudices the interests of
a creditor of the company. The United States‘ US Bankruptcy
Code provides that if a restructuring plan has to clamp down on a
dissenting class of creditors, one of the conditions that it should
satisfy is that it does not unfairly discriminate, and is fair and

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equitable. However, under the Indian insolvency regime, it A
appears that a conscious choice has been made by the legislature
to not confer any independent equity based jurisdiction on the
Adjudicating Authority other than the statutory requirements laid
down under sub-Section (2) of Section 30 of the IBC. [Para
40][975-C-F]
B
1.12 The IBC is a complete code in itself. It defines what is
fair and equitable treatment by constituting a comprehensive
framework within which the actors partake in the insolvency
process. The process envisaged by the IBC is a direct
representation of certain economic goals of the Indian economy.
It is enacted after due deliberation in Parliament and accords C
rights and obligations that are strictly regulated and coordinated
by the statute and its regulations. To argue that a residuary
jurisdiction must be exercised to alter the delicate economic
coordination that is envisaged by the statute would do violence
on its purpose and would be an impermissible exercise of the D
Adjudicating Authority‘s power of judicial review. Hence, once
the requirements of the IBC have been fulfilled, the Adjudicating
Authority and the Appellate Authority are duty bound to abide by
the discipline of the statutory provisions. Neither the Adjudicating
Authority nor the Appellate Authority have an unchartered
jurisdiction in equity. The jurisdiction arises within and as a E
product of a statutory framework. [Para 41][976-B-D, F-G]
2.1 The submission that there has been a failure to maximise
the value of the assets and to balance the interests of the
stakeholders has not been substantiated by any concrete material
before the Court, apart from the reference to the preference F
shares which has already been clarified. Whether the interest of
all stakeholders, including the operational creditors, has been
adequately balanced has to be determined within the four corners
of the statutory provisions of the IBC. It must be borne in mind
that the jurisdiction of the Adjudicating Authority is circumscribed G
by the terms of the provisions conferring the jurisdiction. In the
instant case, the approved resolution plan has in fact provided
for the payments to operational creditors, the percentage of

H
944 SUPREME COURT REPORTS [2021] 8 S.C.R.

A recovery being 19.62 per cent. On the other hand, the payment
to financial creditors is 10.32 per cent. [Para 36][973-D-F]
2.2 In the instant case, the resolution plan has been duly
approved by a requisite majority of the CoC in conformity with
Section 30(4). Whether or not some of the financial creditors were
B required to be excluded from the CoC is of no consequence,
once the plan is approved by a 100 per cent voting share of the
CoC. The jurisdiction of the Adjudicating Authority was confined
by the provisions of Section 31(1) to determine whether the
requirements of Section 30(2) have been fulfilled in the plan as
approved by the CoC. As such, once the requirements of the
C statute have been duly fulfilled, the decisions of the Adjudicating
Authority and the Appellate Authority are in conformity with law.
[Para 42][977-A-C]
Committee of Creditors of Essar Steel India Limited v.
Satish Kumar Gupta (2020) 8 SCC 531 : [2019] 16
D SCR 275; Swiss Ribbons (P) Ltd. v. Union of India
(2019) 4 SCC 17 : [2019] 3 SCR 535; K Sashidhar v.
India Overseas Bank (2019) 12 SCC 150 : [2019] 3
SCR 845 – relied on.
Maneka Gandhi v. Union of India (1978) 1 SCC 248 :
E [1978] 2 SCR 621 – referred to.
3.1 As regards, the inclusion of the realisable value from
the sale of preference shares held by its subsidiary-RB Limited,
in RR Limited, in determining the liquidation value of the
Corporate Debtor; it has been clarified in the affidavit filed by
F the insolvency professional, that under the Insolvency and
Bankruptcy Code and its regulations, the RP appointed two
registered valuers in accordance with Regulation 27 of the
Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016 to carry out
G the valuation of the Corporate Debtor and to determine the
liquidation value and fair value in accordance with Regulation
35(1). These values were placed before the CoC, in accordance
with Regulation 35(2) of the CIRP Regulations, upon receipt of
the resolution plans. The submission of the appellants that the

H
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realisable value from these preference shares is excluded from A
the liquidation value of the Corporate Debtor has been rebutted
by a specific clarification contained in the Monitoring
Committee‘s affidavit, which was filed in these proceedings. As a
matter of fact, the realisable value for the Corporate Debtor on
account of any proceeds realised from the preference shares held
B
by its subsidiary, is included in the determination of the liquidation
value of the Corporate Debtor. This statement in the affidavit is
duly supported by relevant excerpts from the valuation reports,
issued by the appointed valuers. Therefore, the submission that
the value of preference shares has not been included in calculating
the liquidation value of the Corporate Debtor is factually incorrect. C
[Para 18][962-C-G; 964-B-C]
3.2 As regards the liquidation value, it has been clarified
that the liquidation value due to the unsecured operational
creditors would remain nil in all scenarios, including if the corpus
of Rs 800 crores is separately considered. The liquidation value D
of the Corporate Debtor is Rs 4339.58 crores. The amount being
infused by the successful resolution applicant is Rs 3720 crores.
The amount of Rs 800 crores is a value ascribed under the
approved resolution plan to be realised by the Corporate Debtor,
pursuant to the remittance of proceeds in respect of the
preference shares. Hence, cumulatively, the value being E
distributed under the approved valuation plan is Rs 4520 crores.
It has been clarified that even if the liquidation value of the
realisable value of the preference shares were to be considered
in isolation for distribution amongst all the operational creditors,
in terms of the priority contained in Section 53(1), the liquidation F
value due to the appellants would still remain at nil. [Para 19][964-
C-F]
3.3 As regards the order of the NCLT in Doha Bank
proceedings, the order of the NCLT in the application which was
moved by Doha Bank for the removal of certain financial creditors G
from the CoC, has no bearing on the status of the approval of the
resolution plan for the reason that it had received a unanimous
approval with the 100 per cent voting share in the CoC. The
exclusion of certain financial debts and hence, the exclusion of
certain financial creditors from the CoC, pursuant to the order of
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946 SUPREME COURT REPORTS [2021] 8 S.C.R.

A the NCLT in the Doha Bank proceedings, has no practical
implication since the resolution plan continues to be approved
with a 100 per cent majority even after their exclusion. The order
of the NCLT in the Doha Bank proceedings did not provide for
the inclusion of any new financial creditors. The consequence of
the Doha Bank order would be that the inter se distribution
B
between the financial creditors would be affected, which has no
consequence for the operational creditors. In the affidavit which
has been filed by the Monitoring Committee in pursuance to the
order of the 10 March 2021 of this Court, it has also been stated
so.[Para 20, 21][964-F-H; 965-A-B]
C
Case Law Reference

[2019] 3 SCR 535 relied on Para 11

[2019] 16 SCR 275 relied on Para 34, 37, 38
D
[2019] 3 SCR 845 relied on Para 31, 34

[1978] 2 SCR 621 referred to Para 41

CIVIL APPELLATE JURISDICTION: Civil Appeal No.676 of
E 2021.

From the Judgment and Order dated 04.01.2021 of the National
Company Law Appellate Tribunal, New Delhi in CA (AT) (Ins) No.1134
of 2020.
F Dushyant Dave, Sr. Adv., Rajat Sehgal, Tapan Masta,
Mrs. Vandana Anand, Gautam Swarup, Mandavya Kapoor, Kartikeya
Jaiswal, Ms. Gunjan Jindal, Advs. for the Appellants.

Neeraj Kishan Kaul, Sr. Adv., Saurav Panda, Vaijayant Paliwal,
G Ms. Charu Bansal, Ms. Prabh Simrran Kaur, Ms. Ankita Mandal, S. S.
Shroff, Advs. for the Respondents.

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The Judgment of the Court was delivered by A
DR JUSTICE DHANANJAYA Y CHANDRACHUD, J.
Index
A The Appeal
B Corporate Resolution Insolvency Process B
C Approval of Resolution Plan
D Challenge before Appellate Tribunal
E Submissions
C
F Analysis
F.1 Clearing the ground
F.2 Jurisdiction to approve a Resolution Plan
F.3 Exercise of jurisdiction
D
G Conclusion
A The Appeal
1. This appeal arises under Section 62 of the Insolvency and
Bankruptcy Code1, against a judgment the dated 4 January 2021 of the
National Company Law Appellate Tribunal2. Reliance Infratel Limited3 E
is the corporate debtor. The appellants are operational creditors. By its
order dated 3 December 2020, the National Company Law Tribunal,
Mumbai4, approved the resolution plan formulated in the course of the
insolvency resolution process5 of the Corporate Debtor. The NCLAT
has upheld the order.
F
B Corporate Resolution Insolvency Process
2. The CIRPof the Corporate Debtor was initiated by an order
dated 15 May 2018 of the NCLT. An interim resolution professional 6
was appointed on 18 May 2018. The IRP issued a public announcement
G
1
IBC
2
NCLAT/Appellate Authority
3
RIL
4
NCLT/Adjudicating Authority
5
CIRP
6
IRP H
948 SUPREME COURT REPORTS [2021] 8 S.C.R.

A on 21 May 2018 inviting claims from the creditors of the Corporate
Debtor. The order of the NCLT admitting the corporate debtor to the
CIRP was challenged in appeal, and the order of admission was stayed
on 30 May 2018. On 30 April 2019, the NCLAT vacated the stay on the
CIRP.The appeal was withdrawn.
B 3. The CIRP resumed on 7 May 2019. A fresh public
announcement was issued by the IRP on 7 May 2019 for inviting claims
from creditors.The Committee of Creditors7 was constituted on 24 May
2019. On 30 May 2019, the CoC replaced the IRP with Mr. Anish Niranjan
Nanavaty as the Resolution Professional 8. This appointment was
confirmed by the NCLT on 21 June 2019.
C
4. During the course of the process, the RP invited ‘Expressions
of Interest’9 from prospective resolution applicants on 15 July 2019.
Fifteen EOIs were received, and a provisional list was prepared and
furnished to the CoC on 16 August 2019. A request for resolution plan 10
was then issued to the prospective resolution applicants on 21 August
D 2019, together with an information memorandum and evaluation matrix.
With the consent of the CoC, the last date for submission of resolution
plans was extended till 25 November 2019. The RP received resolution
plans from the four prospective resolution applicants:
a) Bharti Airtel Ltd.;
E
b) Reliance Digital Platform & Project ServicesLimited, through
its division Infrastructure Projects;
c) VFSI Holdings Pte. Ltd.; and
d) UV Asset Construction Company Ltd.
F
5. The CoC engaged with the prospective resolution applicants
between 2 January 2020 and 2 March 2020, in pursuance of which revised
resolution plans were submitted. At the 16th meeting of the CoC held on
9 January 2020 (reconvened on 13 January 2020), further discussions
G were held and the resolution plan submitted by Reliance Digital Platform

7
CoC
8
RP
9
EOI
10
RFRP
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and Project Services Limited11 was taken forward as a preferred resolution A
plan on the basis of its “feasibility, viability and implementability”. The
Resolution Applicant submitted a revised resolution plan on 13 January
2020, and upon due verification of its eligibility under Section 29A of the
IBC, was declared a successful resolution applicant at the 19th meeting
of the CoC held on 2 March 2020. The resolution plan was approved
B
with a 100 per cent voting share of the CoC. A letter of intent (“LoI”)
was then issued by the RP on 4 March 2020, which the Resolution
Applicant unconditionally accepted on 6 March 2020.

6. The NCLT has indicated the following extensions which were
granted, consistent with the provisions of the IBC, for completing the C
CIRP:

“5…

i The period of stay between 30.05.2018 and 30.04.2019 was
excluded from the calculation of the CIRP vide order dated D
09.05.2019.

ii. Extension of 90 days was granted vide order dated 29.09.2019.
TheCIRP thus stood extended from 12.10.2019 to 10.01.2020.

iii. Further exclusion of 24 days was granted from the CIRP period E
videorder dated 07.01.2020, owing to time spent in litigation from
the date of approval of the Applicant as RP till the date of
publication of orderconfirming the said appointment.

iv. It was clarified by order dated 24.01.2020 that the RP and the F
CoC wereat liberty to complete CIRP within 330 days, which
was expiring on10.03.2020.”

C Approval of Resolution Plan

7. An application was submitted under Section 30(6) of the IBC G
by the RP, seeking the approval of the resolution plan by the NCLT. The
NCLT discussed the salient aspects of the resolution plan in the course
of its order on the approval application. The financial terms envisaged in
the resolution plan have been tabulated thus:
11
the Resolution Applicant H
950 SUPREME COURT REPORTS [2021] 8 S.C.R.

A PART C

B

C

D

E

F

G

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A

B

C

D

E

F

G

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952 SUPREME COURT REPORTS [2021] 8 S.C.R.

A The plan envisages the following payments for the insolvency
resolution of the Corporate Debtor as a going concern:
“G. Overall payment under the Plan:
Resolution Plan contemplates following payments for theinsolvency
resolution of the Corporate Debtor as a going concern:
B

C

D

E

F
Note-I to the table is as follows:
“Note 1:
Reliance Bhutan Limited (RBL)(wholly owned subsidiary of the
G Corporate Debtor) holds preference shares in one of the other
group companies of Reliance Communications Group, i.e. Reliance
Realty Limited (RRL), which holds certain real estate assets. RA
provides that:
a. In the event RRL is able to sell its real estate assets for an
H amount of INR 800 Crore or more, the RA shall cause that
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 953
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amount of INR 800 Crore (less any taxes and transaction A
costs) from the value realised from the preference shares
held by RBL in RRL to be distributed to the Approving
Financial Creditors on a pro rata basis to their Admitted
Financial Debt within 30 days of the completion of the sale
and all related approvals.
B
b. In the event the amount expected to be realised from the
sale ofthe real estate assets of RRL is less than INR 800
Crore, the RA will purchase the real estate assets of RRL
for INR 800 Crore and said amount of INR 800 Crore (less
any taxes and transaction costs) shall be distributed to the
Approving Financial Creditors on a pro rata basis to their C
Admitted Financial Debt, as would be mutually agreed
between the RA, RRL and the Approving Financial
Creditors.”
8. In the course of deciding upon the approval plan, the NCLT
noted that Doha Bank, which was one of the financial creditors of the D
Corporate Debtor, had instituted proceedings12 challenging the admission
of the claims of a few other creditors and a proceeding13 to impugn the
decision of the RP to recognize the indirect lenders of the Corporate
Debtor as financial creditors. The NCLT noted that the applications
were pending, but it came to the view that the pendency of these and E
other applications would not stand in the way of the approval of the
resolution plan, particularly since it had been unanimously approved by
the CoC. However, it clarified that the distribution of payments to
creditors, financial or operational, shall be subject to the orders which
are passed in the interim applications, within the ambit of the IBC. In the
above backdrop, the NCLT by its order dated 3 December 2020 approved F
the resolution plan in terms of the following directions:
“14. In view of the discussions and the law thus settled, the instant
Resolution Plan meets the requirements of Section 30(2) of the
Code and Regulations 37, 38, 38(1A) and 39(4) of the Regulations.
The Resolution Plan is not in contravention of any of the provisions G
of Section 29A of the Code and is inaccordance with law. The
same needs to be approved.

12
IA 1960 of 2019
13
IA 3055 of 2019 H
954 SUPREME COURT REPORTS [2021] 8 S.C.R.

A 15. Doha Bank one of the Financial Creditors has filed IA No.
1960 of 2019 inter alia, challenging the admission of claims of few
other Creditors and IA No. 3055 of 2019 impugning the decision
of the Resolution Professional recognising the Indirect Lenders
of the Corporate Debtor as Financial Creditors. The Applications
are pending consideration. We are of the considered opinion that
B
pendency of these and other Applications would not come in the
way of approval or otherwise of the Resolution Plan. More so,
when the Resolution Plan has been unanimously approved by the
CoC. The distribution of the payments to the Creditors, Financial
or Operational, as the case may be, shall be subject to orders to
C be passed in the respective Interim Applications within the ambit
of the Code. We are thus inclined to dispose of this Application in
the following terms. Hence ordered.
ORDER
i. The Application be and the same is allowed. The Resolution
D Plan submitted by Reliance Digital Platform & Project
Services Limited through its division Infrastructure Projects
annexed to the Application is hereby approved. It shall
become effective from this date and shall form part of this
order. It shall be binding on the Corporate Debtor, its
E employees, members, creditors, including the Central
Government, any State Government or any local authority
to whom a debt in respect of the payment of dues arising
under any law for the time being in force is due, guarantors
and other stakeholders involved in the Resolution Plan.

F ii. The distribution of the payments to the Financial Creditors
shall abide by and be subject to the orders passed in IA
Nos. 1960 of 2019 and 3055 of 2019 pending consideration
of this Bench. The amount sought to be infused by the
Resolution Applicant shall be kept in an interest bearing
deposit in any Nationalised Bank till disposal of the said
G Applications.
iii. The approval of the Resolution Plan shall not be construed
as waiver of any statutory obligations of the Corporate
Debtor and shall be dealt by the appropriate Authorities in
accordance with law. Any waiver sought in the Resolution
H
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 955
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

Plan, shall be subject to approval by the Authorities A
concerned.
iv. The Memorandum of Association (MoA) and Articles of
Association (AoA) shall accordingly be amended and filed
with the Registrar of Companies (RoC), concerned for
information and record. The Resolution Applicant, for B
effective implementation of the Plan, shall obtain all
necessary approvals, under any law for the time being in
force, within such period as may be prescribed.
v. Henceforth, no creditors of the erstwhile Corporate Debtor
can claim anything other than the liabilities referred to in C
Para 6 supra.
vi. The moratorium under Section 14 of the Code shall cease
to have effectfrom this date.
vii. The Applicant and the Monitoring Committee shall supervise
the implementation of the Resolution Plan and the Applicant D
shall file status of its implementation before this Authority
from time to time, preferably every quarter.
viii. The Applicant shall forward all records relating to the
conduct of the CIRP and the Resolution Plan to the IBBI
along with copy of this Orderfor information….” E
D Challenge before Appellate Tribunal
9. The appellants challenged the decision of the NCLT approving
the resolution plan in appeal before the NCLAT. The grounds of challenge
of the appellants were:
F
(i) The appellants were kept unaware of the CIRP and no
details were provided by the RP as regards the disposal of
the fund towards their claims;
(ii) The claims of the appellants had not received a fair and
equitable treatment; G
(iii) The fair marketvalue and the liquidation value of the
Corporate Debtor had not been taken into account and an
amount of Rs 800 crores, being the value of certain
preference shares, did not form a part of the corpus of
payments to the operational creditors; H
956 SUPREME COURT REPORTS [2021] 8 S.C.R.

A (iv) There were material irregularities in the accumulation and
disbursal of funds that constituted the corpus of the corporate
debtor; and
(v) The appellants were made to suffer a reduction of 90 per
cent of their total claims,while substantial claims of nearly
B Rs 120 crores have been rejected.
10. The NCLAT by its judgment dated 4 January 2021 rejected
the appeal. The NCLAT noted that there was no substance in the
grievance that the operational creditors had been unfairly or inequitably
treated in regard to the distribution of funds. As a matter of fact,
C operational creditors (other than related parties and statutory creditors)
were allocated 19.62 per cent of the up-front payment of Rs 3720 crores,
while the financial creditors were paid only an amount of 10.32 per cent
of the upfront payment. The approved resolution plan, the NCLAT
observed, ensures restructuring and revival of the corporate debtor.

D 11. The appellants were not excluded from the CIRP as they had
filed their claims, which had been partly admitted. In dealing with the
submission that there was an absence of equitable treatment of the
operational creditors, the NCLAT held that equitable treatment can be
claimed only by similarly situated creditors. Operational creditors stand
on a different footing as compared to financial creditors. They are entitled
E to receive payment not less than liquidation value, which does not apply
to financial creditors. In this backdrop, the NCLAT relied upon the
decisions of this Court in Swiss Ribbons (P) Ltd. vs Union of India14
(“Swiss Ribbons”) and Committee of Creditors of Essar Steel
India Limited vsSatish Kumar Gupta 15 (“Essar Steel India
F Limited”). Finally,the NCLAT did not find substance in the grievance
in regard to the preferential shares. It held that the distribution mechanism
conforms to the provisions of Section 53 and was in accordance with
the provisions of the IBC. The appeal was accordingly dismissed.
E Submissions
G 12. When the present appeal came up on 10 March 2021, this
Court noted the submission of the learned Senior Counsel that as a
consequence of the order of the NCLT of 2 March 2021, certain entities
which were recognized as financial creditors in the resolution plan have
14
(2019) 4 SCC 17
15
H (2020) 8 SCC 531
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 957
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

been de-recognized as financial creditors. The issue, then, was whether A
this decision would have any bearing on the requisite majority required
to pass a resolution plan. The Court noted the submission of Senior
Counsel for the Monitoring Committee, that the resolution plan has been
approved by 100 per cent of the voting shares and the exclusion of some
financial creditors from the CoC would be of no consequence. However,
B
since the issue had been raised during the course of the submission, by
an order dated 10 March 2021, opportunities were granted to the parties
to file affidavits explaining the position. Affidavits have accordingly been
exchanged between the parties, to which a reference would be made. It
is in this backdrop that the appeal has been heard finally at this stage.
13. Mr Dushyant Dave, learned Senior Counsel has appeared on C
behalf of the appellants. Mr Neeraj Kishan Kaul, learned Senior Counsel
addressed the submissions on behalf of the Monitoring Committee.
14. Mr Dushyant Dave, learned Senior Counsel, submitted on
behalf of the appellants that:
D
(i) The stated object and purpose of the IBC is to balance the
interest of all stakeholders and to maximize the value of
assets. The long title to the IBC elucidates that the legislation
seeks to:
“… consolidate and amend the laws relating to E
reorganization and insolvency resolution of corporate
persons, partnership firms and individuals in a time-bound
manner for maximization of value of assets of such
persons, to promote entrepreneurship, availability of
credit and balance the interests of all the stakeholders
including alteration in the order of priority of payment of F
Government dues and to establish an Insolvency and
Bankruptcy Board of India.”
(ii) The CIRP must be just, fair and equitable to all stakeholders,
and cannot place the interest of the financial creditors at a
higher pedestal at the cost of other stakeholders. In the G
present case, the operational creditors are small and medium
scale companies who have supplied goods and services to
the Corporate Debtor andtheir interests have not been taken
into consideration;
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958 SUPREME COURT REPORTS [2021] 8 S.C.R.

A (iii) The CIRP has been conducted in a secretive manner, in
violation of the principles of natural justice and there has
been an absence of information to the operational creditors
in regard to the contentsof the resolution plan. As a result,
it was only after an order approving the resolution plan was
passed by the Adjudicating Authority, that the appellant
B
became aware of the specifics of the resolution plan;
(iv) The appellants are telecom service providers of the
Corporate Debtor.The total operational debt owed to them
amounts to Rs 190.40 crores (approx.), constituting over
90 per cent of the total operational debts of the Corporate
C Debtor. These operational creditors have provided core
service in the nature of operation and maintenance of
telecom towers and the optical fiber network and associated
passive infrastructure equipment. The interest of the
operational creditors, who are small and medium size
D companies, have not been borne in mind by the CoC by
placing certain assets of the Corporate Debtor outside the
resolution amount. The assets of the Corporate Debtor, held
directly or indirectly through subsidiaries, should be available
for distribution to all stakeholders;
E (v) The resolution plan segregates and reserves a portion of
the Corporate Debtor’s assets amounting to Rs 800 crores
for distribution to certain financial creditors alone, despite
there being no specific charge on such sums in their favor.
This vitiates the object of the IBC which is to maximize the
value of the assets of the Corporate Debtor and balance
F the interest of all stakeholders;
(vi) The resolution plan has reserved a sum of Rs 800 crores
exclusively for distribution to the financial creditors, and
the said amount does not form a part of the total resolution
amount of Rs 3720 crores being paid by the resolution
G applicant to acquire the Corporate Debtor. This sum of Rs
800 crores is realizable from the preference shares held by
Reliance Bhutan Limited, a wholly owned subsidiary of the
Corporate Debtor in Reliance Reality Limited. On the other
hand, if Reliance Realty Limited is unable to sell such real
H estate assets for Rs 800 crores or more, the Resolution
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 959
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

Applicant would itself buy such assets for Rs 800 crores A
and make such funds available for distribution to the specified
financial creditors. In apportionment, a sale of Rs 800 crores
exclusively for the benefit of specified financial creditorsis
a violation of Section 30(2)(b) of the IBC;
(vii) The NCLT on an application filed by Doha Bank, a financial B
creditor of the Corporate Debtor,by its order dated 2 March
2021, set aside the inclusion of these banks (State Bank of
India, Bank of India, UCO Bank, Syndicate Bank, Oriental
Bank of Commerce and Indian Overseas Bank) from the
CoC. Similarly, on the same analogy, various indirect
creditors of the Corporate Debtor have also been excluded. C
The basis of the inclusion of certain financial creditors (this
being challenged in the Doha Bank proceedings) was that
the Corporate Debtor had executed a deed of guarantee in
favour of these banks for securing a rupee loan facility
availed by Reliance Communications Limited, the holding D
company of the Corporate Debtor and Reliance Telecom
Limited in violation of the facilities agreement between the
consortium of the corporate debtor. The NCLT excluded
these banks from the CoC, albeit prospectively, without
implications on the decisions which were taken until the
date of the order; E

(viii) It is the appellant’s understanding that in the case of two
other indirect creditors as well, the Corporate Debtor had
executed corporate guarantees to secure fund based/non-
fundbased facilities.Since at the time of the application
preferred by Doha Bank, the indirect creditors were not F
members of the CoC, no directions were issued in that
regard. However, it is the understanding of the appellants
that the exclusion of the indirect creditors would have
significant implications on the distribution of funds under
the resolution plan, if not on the validity of the plan. The G
claims of the six banks which were excluded by the NCLT
were admitted by the RP on the basis of a legal opinion,
which is also the basis of admitting the claims of twenty-
one similarly situated indirect creditors of the Corporate
Debtor;
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960 SUPREME COURT REPORTS [2021] 8 S.C.R.

A (ix) The NCLT failed to properly appreciate and consider the
implication of the exclusion of certain creditors from the
CoC, on the ground that the pendency of the applications
by Doha Bank would not come in the way of the approval
of the resolution plan. In the event that the twenty-one
indirect creditors are excluded, this would have implications
B
on the constitution of the CoC as well as on the rate of
recovery for the financial creditors which may stand
increased from 10.32 per cent to 91.98 per cent. On the
other hand, the operational creditors would have a mere
recovery of 19.62 per cent; and
C (x) There has been an absence of transparency in the process
leading up to the approval of the resolution plan.The IBC
mandates that the CoC consist only of financial creditors,
while the operational creditors are only allowed to attend
the meetings without voting rights in case the amount of
D their aggregate duesis not less than 10 per cent of the total
debt of the Corporate Debtor.As a result, operational
creditors are left unaware of the process and the entire
decision making is left to the CoC based on its commercial
wisdom. One of the grounds of appeal under Section
61(3)(ii) is a material irregularity in the exercise of powers
E by the RP during the CIRP. The issues faced by operational
creditors have also been recognized in the report of the
Insolvency Committee Report of February 2020.
15. Opposing the above submissions, Mr Neeraj Kishan Kaul,
learned Senior Counsel submits that:
F
(i) In the provisions of the IBC, specific stipulations have been
framed in respect of the operational creditors,namely:
a. Under Section 30(2)(b), the payment of debts to the
operational creditors in the resolution plan shall not be
G less than the amount to be paid in the event of a liquidation
under Section 53;
b. Priority in terms of the water fall mechanism contained
in Section 53 is provided; and
c. Representation of their views in the CoC is envisaged
H under Section 24(3)(c),through the operational creditors
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 961
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

themselves or the representatives if they have aggregate A
dues which are not less than 10 per cent of the debt of
the Corporate Debtor;
(ii) If the proceedings were to take place strictly in accordance
with the provisions of the IBC, the liquidation value would
be zero.However, despite this, the resolution plan has B
provided for the operational creditors to receive 19.62 per
cent of their dues as against 10.32 per cent for the financial
creditors;
(iii) The order of the NCLT by which six banks were excluded
from the CoC has been stayed in appeal by the NCLAT. C
However, this issue is a non sequitur since the decision of
the CoC to approve the resolution plan is with a voting share
of 100 per cent.The exclusion of any financial creditors
from the CoC has no significance to the requisite majority
required for passing a resolution plan;
D
(iv) The issue in regard to the exclusion of twenty-one indirect
creditors is sought to be raised for the first time in this Court
in the additional affidavit. Even if, for the sake of argument,
it were to be conceded that twenty-one indirect creditors
are excluded andfinancial creditors will receive 90 per cent
of their dues,there is a fundamental difference under the E
IBC between the position of operational creditors and
financial creditors which is emphasised by the decision of
this Court in Essar Steel India Limited (supra);
(v) The principle of equitable treatment applies as between
creditors belonging to the same class, which is emphasised F
by Explanation 1to Section 30(2)(b);
(vi) There is a fundamental error on the part of the appellants
in overlooking that the sum of Rs800 crores, which is the
realisable value of the preference shares, is a part of
liquidation value. Thus, the value of these preference shares G
has been duly taken into account; and
(vii) The CoC has approved the resolution plan based on its
commercial wisdom. The NCLT in declining to scrutinize
the commercial wisdom of the CoC has acted in accordance
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962 SUPREME COURT REPORTS [2021] 8 S.C.R.

A with the provisions of the IBC as well as the decisions of
this Court.
16. The rival submissions will now be analyzed.
F Analysis
B F.1 Clearing the ground
17. Before we deal with the legal submissions which have been
canvassed during the course of the hearing, it is necessary to clear the
ground on three factual aspects bearing on the outcome of the appeal:
(i) Valuation of Preference Shares
C
18. The first aspect is in relation to the inclusion of the realisable
value from the sale of preference shares held by Reliance Bhutan Limited,
in Reliance Realty Limited, in determining the liquidation value of the
Corporate Debtor. It has been clarified in the affidavit filed by the
insolvency professional, in pursuance of the order of this Court dated 10
D March 2021, that under the IBC and its regulations, the RP appointed
two registered valuers in accordance with Regulation 27 of the Insolvency
and Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 201616 to carry out the valuation of the
Corporate Debtor and to determine the liquidation value and fair value in
accordance with Regulation 35(1). These values were placed before
E the CoC, in accordance with Regulation 35(2) of the CIRP Regulations,
upon receipt of the resolution plans. The submission of the appellants
that the realisable value from these preference shares is excluded from
the liquidation value of the Corporate Debtor has been rebutted by a
specific clarification contained in the Monitoring Committee’s affidavit,
which was filed in these proceedings. As a matter of fact, the realisable
F
value for the Corporate Debtor on account of any proceeds realised
from the preference shares held by its subsidiary (Reliance Bhutan
Limited), is included in the determination of the liquidation value of the
Corporate Debtor. This statement in the affidavit is duly supported by
relevant excerpts from the valuation reportsdated 2 January 2020 and 6
G December 2019, issued by the appointed valuers. The relevant extract
from the report by Mr. Rakesh Narula on the fair value and liquidation
value of the Corporate Debtor is set out below:

16
CIRP Regulations
H
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 963
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

“Basis of valuation & assumptions: A
Non-Current Assets:
1) Investment:
The balance of investment as per provisional financial statements
was Rs 5 lakhs as on valuation date. It represents investment in B
equity shares of Reliance Bhutan Limited.
The only asset in the audited financial statements of the subsidiary
is investment in preference shares of Reliance Realty Limited.
Based on our independent analysis of the value of real estate
sitting on the balance sheet of Reliance Realty, we are of the C
opinion that the investment in Reliance Realty Limited is fully
recoverable in the books of Reliance Bhutan Limited.
The book value of this investment is Rs 200 crores at which
Reliance Bhutan Limited had purchased these shares from
Reliance Infratel Limited. The original issue price of the preference D
shares was Rs 2,000 crores at which Reliance Realty Limited
had issued the shares to Reliance lnfratel Limited in the financial
year 2016 - 17, these shares were subsequently in the year
2016 - 17 were sold to Reliance Bhutan Limited for Rs. 200 Crores.
We have considered such shares to be redeemed at the original E
issue price of Rs 2,000 crores. Out of this receipt of Rs 2,000
crores, Reliance Bhutan Limited has existing liability of Rs 200
crores in the balance sheet which shall be paid first. The remaining
balance of Rs 1,800 crores shall flow to the parent company,
Reliance lnfratel Limited, which is considered as the fair value of
this investment. F

The liquidation value is determined by discounting the fair value
by 30% as the prevailing discount rate considering the current
status of operations of the company.
2) FinancialAssets: G
The carrying amount of the financial assets was Rs1 crore as per
the provisional financial statements as on the valuation date. It
comprises of the following:
a) Other Financial Assets:
H
964 SUPREME COURT REPORTS [2021] 8 S.C.R.

A It comprises of Rs 1 crores of deposits with bank having maturity
of more than 12 months. We had requested for balance
confirmation for these deposits. We were not provided with either
balance confirmations/ bank statements.
Since the same balance was disclosed in audited financials for
B the period ended 31st March 2018 and in the provisional financial
statements as on the valuation date,we……”
Therefore, the submission that the value of preference shares
has not been included in calculating the liquidation value of the Corporate
Debtor is factually incorrect.
C (ii) Liquidation Value
19. The second aspect relates to the liquidation value. On this, it
has been clarified that the liquidation value due to the unsecured
operational creditors would remain nil in all scenarios, including if the
corpus of Rs 800 crores is separately considered. The liquidation value
D of the Corporate Debtor is Rs 4339.58 crores. The amount being infused
by the successful resolution applicant is Rs 3720 crores. The amount of
Rs 800 crores is a value ascribed under the approved resolution plan to
be realised by the Corporate Debtor, pursuant to the remittance of
proceeds in respect of the preference shares. Hence, cumulatively, the
E value being distributed under the approved valuation plan is Rs 4520
crores. It has been clarified that even if the liquidation value of the
realisable value of the preference shares were to be considered in isolation
for distribution amongst all the operational creditors, in terms of the priority
contained in Section 53(1) of the Code, the liquidation value due to the
appellants would still remainat nil.
F
(iii) The impact of exclusion
20. The third aspect relates to the order of the NCLT in Doha
Bank proceedings. The order of the NCLT in the application which was
moved by Doha Bank for the removal of certain financial creditors from
the CoC, has no bearing on the status of the approval of the resolution
G
plan for the reason that it had received a unanimous approval with the
100 per cent voting share in the CoC. The exclusion of certain financial
debts and hence,the exclusion of certain financial creditors from the
CoC, pursuant to the order of the NCLT in the Doha Bank proceedings,
has no practical implication since the resolution plan continues to be
H approved with a 100 per cent majority even after their exclusion.
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 965
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

21. The order of the NCLT in the Doha Bank proceedings did not A
provide for the inclusion of any new financial creditors. The consequence
of the Doha Bank order would be that the inter se distribution between
the financial creditors would be affected, which has no consequence for
the operational creditors. In the affidavit which has been filed by the
Monitoring Committee in pursuance to the order of the 10 March 2021
B
of this Court, it has also been stated that:
“.. in terms of the Doha Bank Order, upon the exclusion of certain
erstwhile financial creditors from the COC of the Corporate Debtor
(and correspondingly the financial debt of such creditors), the
revised financial debt in respect of the Corporate Debtor shall be
INR 3,11,84,51,89,041/- (Thirty one thousand one hundred eighty C
four crores fifty one lakhs eighty nine thousand and forty one).
Being an amount which is more than 7 times the liquidation value
of the Corporate Debtor, such exclusion will have no implication
in respect of the distribution to operational creditors under the
resolution plan.” D
The above statement has not been controverted during the course
of the submissions.
F.2 Jurisdiction to approve a Resolution Plan
22. The resolution plan was approved by the CoC, in compliance E
with the provisions of the IBC. The jurisdiction of the Adjudicating
Authority under Section 31(1) is to determine whether the resolution
plan, as approved by the CoC, complies with the requirements of Section
30(2). The NCLT is within its jurisdiction in approving a resolution plan
which accords with the IBC. There is no equity-based jurisdiction with
the NCLT, under the provisions of the IBC. F
23. Now, it is in this backdrop that it becomes necessary for this
Court to revisit some of the provisions of the IBC and to take note of the
interpretation which has been placed upon them in successive decisions
of this Court. Section 30(1) envisages the submission of a resolution
plan by a resolution applicant.On the submission of the resolution plan, G
the RP is required to examine it and to confirm, in terms of sub-Section
(2) of Section 30, that the plan abides by the statutory requirements spelt
out in clauses (a) to (f)17.
17
(2) The resolution professional shall examine each resolution plan received by him to
confirm that each resolution plan—
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966 SUPREME COURT REPORTS [2021] 8 S.C.R.

A PART F
24. The RP has to present to the CoC,for its approval, such
resolution plans which conform to the conditions specified in sub-Section
(2) of Section 30.The approval of the resolution plan is a statutory function
which is entrusted to the CoC,under sub-Section (4) of Section 30. The
CoC may approve a resolution plan with avoting percentage of not less
B
66 per cent of the voting shares of financial creditors after considering:
(i)its feasibility and viability; (ii) the manner of distribution proposed
having regard to the order of priority amongst creditors laid down in
Section 53(1) of the IBC, including priority and value of the security
interest of the secured creditors; and (iii) such other requirements as
C may be specified by the Insolvency and Bankruptcy Board of India. In
other words, the decision to approve a resolution plan is entrusted to the
CoC.
(a) 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;
(b) provides for the payment of debts of operational creditors in such manner as may
D be specified by the Board which shall not be less than —
(i) the amount to be paid to such creditors in the event of a liquidation of the corporate
debtor under Section 53; or
(ii) 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 (1) 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
E
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 (1) of Section 53 in
the event of a liquidation of the corporate debtor.
Explanation 1.—For the removal of doubts, it is hereby clarified that a distribution in
accordance with the provisions of this clause shall be fair and equitable to such creditors.
Explanation 2.—For the purposes of this clause, it is hereby declared that on and from
F the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act,
2019, the provisions of this clause shall also apply to the corporate insolvency resolution
process of a corporate debtor—
(i) where a resolution plan has not been approved or rejected by the Adjudicating
Authority;
(ii) where an appeal has been preferred under Section 61 or Section 62 or such an appeal
is not time barred under any provision of law for the time being in force; or
G (iii) where a legal proceeding has been initiated in any court against the decision of the
Adjudicating Authority in respect of a resolution plan;
(c) provides for the management of the affairs of the corporate debtor after approval of
the resolution plan;
(d) the implementation and supervision of the resolution plan;
(e) does not contravene any of the provisions of the law for the time being in force;
(f) conforms to such other requirements as may be specified by the Board.”
H
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 967
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25. The function of the Adjudicating Authority under Section 31 is A
to determine whether the resolution plan “as approved by the CoC”
under Section 30(4) “meets the requirements” under Section 30(2). If
the Adjudicating Authority is satisfied that the resolution plan,as approved,
meets the requirements under sub-Section (2) of Section 30, “it shall by
order approve the resolution plan” which shall then be binding on
B
the Corporate Debtor and all stakeholders, including those specifically
spelt out:
“31. (1) If the Adjudicating Authority is satisfied that the resolution
plan as approved by the committee of creditors under sub-section
(4) of section 30 meets the requirements as referred to in
sub-section (2) of section 30, it shall by order approve the resolution C
plan which shall be binding on the corporate debtor and its
employees, members, creditors, including the Central Government,
any State Government or any local authority to whom a debt in
respect of the payment of dues arising under any law for the time
being in force, such as authorities to whom statutory dues are D
owed, guarantors and other stakeholders involved in the resolution
plan.”
26. The jurisdiction which has been conferred upon the
Adjudicating Authority in regard to the approval of a resolution plan is
statutorily structured by sub-Section (1) of Section 31. The jurisdiction is E
limited to determining whether the requirements which are specified in
sub-Section (2) of Section30 have been fulfilled. This is a jurisdiction
which is statutorily-defined, recognised and conferred, and hence cannot
be equated with a jurisdiction in equity, that operates independently of
the provisions of the statute. The Adjudicating Authority as a body owing
its existence to the statute, must abide by the nature and extent of its F
jurisdiction as defined in the statute itself.
27. The jurisdiction of the Appellate Authority under Section 61(3),
while considering an appeal against an order approving a resolution plan
under Section 31, is similarly structured on specified grounds. Section
61(3) provides: G
“61…..(3) An appeal against an order approving a resolution plan
under section 31 may be filed on the following grounds, namely:—
(i) the approved resolution plan is in contravention of the provisions
of any law for the time being in force;
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968 SUPREME COURT REPORTS [2021] 8 S.C.R.

A (ii) there has been material irregularity in exercise of the powers
by the resolution professional during the corporate insolvency
resolution period;
(iii) the debts owed to operational creditors of the corporate debtor
have not been provided for in the resolution plan in the manner
B specified by the Board;
(iv) the insolvency resolution process costs have not been provided
for repayment in priority to all other debts; or
(v) the resolution plan does not comply with any other criteria
specified by the Board.”
C
28. Section 5(7) defines the expression ‘financial creditors’ while
Section 5(8) defines the expression ‘financial debt’. The expression
‘operational creditor’ is defined in Section 5(20), while the expression
‘operational debt’ is defined in Section 5(21). Now, insofar as the
operational creditors are concerned, there are specific requirements which
D have been spelt out in sub-Section (2)(b) of Section 30. Section 30(2)(b)
requires the RP to confirm upon examination that the resolution plan:
“30…(2)….(b) 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-
E
(i) the amount to be paid to such creditors in the event of a liquidation
of the corporate debtor under section 53; or
(ii) 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
F
(1) 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
G accordance with sub-section (1) of section 53 in the event of a
liquidation of the corporate debtor.
Explanation 1. — For removal of doubts, it is hereby clarified that
a distribution in accordance with the provisions of this clause shall
be fair and equitable to such creditors….”
H
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 969
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In other words, the amount which ispayable to the operational A
creditors towards their debts must at least be either what is provided in
sub-clause (i) or sub-clause (ii) of clause (b), whichever is higher. Sub
clause (i) refers to the amount paid to the operational creditors in the
event of a liquidation under Section 53. Sub-clause (ii) refers to the
amount that would have been paid to the operational creditors, if the
B
amount to be distributed under the resolution plan was distributed in
accordance with the order of priority under Section 53(1)(b), which
provides for a waterfall mechanism.
29. These provisions indicate that the ambit of the Adjudicating
Authority is to determine whether the amount that is payable to the
operational creditors under the resolution plan is consistent with the above C
norms which have been stipulated in clause (b) of sub-clause (2) of
Section 30. Significantly, Explanation-1 to clause (b), which is clarificatory
in nature, provides that a distribution which is in accordance with the
provisions of the clause “shall be fair and equitable” to such creditors.
Fair and equitable treatment, in other words, is what is fair and equitable D
between the operational creditors as a class, and not between different
classes of creditors. The statute has indicated that once the requirements
of Section 30(2)(b) are fulfilled, the distribution in accordance with its
provisions is to be treated as fair and equitable to the operational creditors.
30. The appellants are challenging the treatment of operational E
creditors on the ground that it has not been fair and equitable. The
entitlement of the operational creditors being defined by sub-clause (b)
of sub-section (2) of Section 30, the clarification contained in Explanation-
1 must apply. As such, as long as the payment under the resolution plan
is fair and equitable amongst the operational creditors as a class, it satisfies
the requirements of Section 30(2)(b). F

31. The nature of the jurisdiction which is exercised by the
Adjudicating Authority, while approving a resolution plan under Section
31, has been interpreted in the judgment of a two-JudgeBench in
K Sashidhar vs India Overseas Bank 18(“K Sashidhar”). The
decision emphasizes that the Adjudicating Authority is circumscribed by G
Section 31 to scrutinizing the resolution plan “as approved” by the CoC
under Section 30(4). Moreover, even within the scope of that enquiry,
the grounds on which the Adjudicating Authority can reject the plan is

18
(2019) 12 SCC 150 H
970 SUPREME COURT REPORTS [2021] 8 S.C.R.

A with reference to the matters specified in sub-Section (2) of Section
30.Similarly, the Court notes that the jurisdiction of the Appellate Authority
to entertain an appeal against an approved resolution plan is defined by
sub-Section (3) of Section 61. Now, it is in this context, that the consistent
principle of law which has been laid down is that neither the Adjudicating
Authority nor the Appellate Authority can enter into the commercial
B
wisdom underlying the approval granted by the CoC to the resolution
plan. The commercial wisdom of the CoC in its collegialcapacity is, hence,
not justiciable.
32. In K Sashidhar (supra), Justice AM Khanwilkar, speaking
for the two-Judge Bench, held:
C
“57. On a bare reading of the provisions of the I&B Code, it
would appear that the remedy of appeal under Section 61(1) is
against an “order passed by the adjudicating authority (NCLT)”,
which we will assume may also pertain to recording of the fact
that the proposed resolution plan has been rejected or not approved
D by a vote of not less than 75% of voting share of the financial
creditors. Indubitably, the remedy of appeal including the width of
jurisdiction of the appellate authority and the grounds of appeal, is
a creature of statute. The provisions investing jurisdiction and
authority in NCLT or NCLAT as noticed earlier, have not made
E the commercial decision exercised by CoC of not approving the
resolution plan or rejecting the same, justiciable. This position is
reinforced from the limited grounds specified for instituting an
appeal that too against an order “approving a resolution plan”
under Section 31. First, that the approved resolution plan is in
contravention of the provisions of any law for the time being in
F force. Second, there has been material irregularity in exercise of
powers “by the resolution professional” during the corporate
insolvency resolution period. Third, the debts owed to operational
creditors have not been provided for in the resolution plan in the
prescribed manner. Fourth, the insolvency resolution plan costs
G have not been provided for repayment in priority to all other debts.
Fifth, the resolution plan does not comply with any other criteria
specified by the Board. Significantly, the matters or grounds—be
it under Section 30(2) or under Section 61(3) of the I&B Code—
are regarding testing the validity of the “approved” resolution plan
by CoC; and not for approving the resolution plan which has been
H
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 971
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

disapproved or deemed to have been rejected by CoC in exercise A
of its business decision.
58. Indubitably, the inquiry in such an appeal would be limited to
the power exercisable by the resolution professional under Section
30(2) of the I&B Code or, at best, by the adjudicating authority
(NCLT) under Section 31(2) read with Section 31(1) of the I&B B
Code. No other inquiry would be permissible. Further, the
jurisdiction bestowed upon the appellate authority (NCLAT) is
also expressly circumscribed. It can examine the challenge only
in relation to the grounds specified in Section 61(3) of the I&B
Code, which is limited to matters “other than” enquiry into the
autonomy or commercial wisdom of the dissenting financial C
creditors. Thus, the prescribed authorities (NCLT/NCLAT)
have been endowed with limited jurisdiction as specified in
the I&B Code and not to act as a court of equity or exercise
plenary powers.
59. In our view, neither the adjudicating authority (NCLT) nor the D
appellate authority (Nclat) has been endowed with the jurisdiction
to reverse the commercial wisdom of the dissenting financial
creditors and that too on the specious ground that it is only an
opinion of the minority financial creditors…...”
(emphasis supplied) E

The Court, also held (in paragraph 62) that the legislative history
of the IBC indicated that “there is a contra indication that the commercial
or business decisions of financial creditors are not open to any judicial
review by the adjudicating authority or the appellate authority”.
F
33. The above principles have been re-emphasised and taken
furtherby a three-Judge Bench in Essar Steel India Limited (supra).
The Court, speaking through Justice R F Narminan, held:
“73. There is no doubt whatsoever that the ultimate discretion of
what to pay and how much to pay each class or sub-class of
G
creditors is with the Committee of Creditors, but, the decision of
such Committee must reflect the fact that it has taken into account
maximising the value of the assets of the corporate debtor and
the fact that it has adequately balanced the interests of all
stakeholders including operational creditors. This being the case,
judicial review of the Adjudicating Authority that the resolution H
972 SUPREME COURT REPORTS [2021] 8 S.C.R.

A plan as approved by the Committee of Creditors has met the
requirements referred to in Section 30(2) would include judicial
review that is mentioned in Section 30(2)(e), as the provisions of
the Code are also provisions of law for the time being in force.
Thus, while the Adjudicating Authority cannot interfere on merits
with the commercial decision taken by the Committee of Creditors,
B
the limited judicial review available is to see that the Committee
of Creditors has taken into account the fact that the corporate
debtor needs to keep going as a going concern during the
insolvency resolution process; that it needs to maximize the value
of its assets; and that the interests of all stakeholders including
C operational creditors has been taken care of. If the Adjudicating
Authority finds, on a given set of facts, that the aforesaid
parameters have not been kept in view, it may send a resolution
plan back to the Committee of Creditors to re-submit such plan
after satisfying the aforesaid parameters. The reasons given by
the Committee of Creditors while approving a resolution plan may
D
thus be looked at by the Adjudicating Authority only from this
point of view, and once it is satisfied that the Committee of Creditors
has paid attention to these key features, it must then pass the
resolution plan, other things being equal.”
34. The precedents laid down by this Court are in tandem with
E recommendations made in the UNCITRAL’s Legislative Guide on
Insolvency Law, which states that it is desirable that a court does not
interfere with the commercial wisdom of the decisions taken by the
creditors. The relevant extract is reproduced below19:
“63. The more complex the decisions the court is asked to make
F in terms of approval or confirmation, the more relevant knowledge
and expertise is required of the judges and the greater the potential
for judges to interfere in what are essentially commercial decisions
of creditors to approve or reject a plan. In particular, it is highly
desirable that the law not require or permit the court to review the
G economic and commercial basis of the decision of creditors
(including issues of fairness that do not relate to the approval
procedure, but rather to the substance of what has been agreed)
nor that it be asked to review particular aspects of the plan in
19
Available at <https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/
H uncitral/en/05-80722_ebook.pdf> accessed 6 August 2021, pg. 228-229
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 973
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

terms of their economic feasibility, unless the circumstances in A
which this power can be exercised are narrowly defined or the
court has the competence and experience to exercise the necessary
level of commercial and economic judgement.”
F.3 EXERCISE OF JURISDICTION
35. Mr Dushyant Dave, learned Senior Counsel, sought to place B
emphasis on the abovementioned observations in paragraph 73 of the
decision in Essar Steel India Limited (supra) to submit that the decision
of the CoC must reflect that it has taken into account the need to:
(i) Maximize the value of assets of the CD; and
C
(ii) Adequately balance theinterest of all stakeholders,including
of operational creditors.
The submission of learned Counsel is that in the present case,
there was a failure to maximise the value of the assets and to balance
the interests of the stakeholders. D
36. The submission that there has been a failure to maximise the
value of the assets has not been substantiatedby any concrete material
before the Court, apart from the reference to the preference shares
which has already been clarified earlier in this judgment. Whether the
interest of all stakeholders, including the operational creditors, has been
E
adequately balanced has to be determined within the four corners of the
statutory provisions of the IBC.It must be borne in mind that the jurisdiction
of the Adjudicating Authority is circumscribed by the terms of the
provisions conferring the jurisdiction. In the present case, the approved
resolution plan has in fact provided for the payments to operational
creditors, the percentage of recovery being 19.62 per cent. On the other F
hand, the payment to financial creditors is 10.32 per cent.
37. The observations in paragraph 73 of the decision in Essar
Steel India Limited (supra) clarify that once the Adjudicating Authority
is satisfied that the CoC has applied its mind to the statutory requirements
spelt out in sub-Section (2) of Section 30, it must then pass the resolution G
plan. The decision also emphasises that equitable treatment of creditors
is “equitable treatment” only within the same class. In this context, the
judgment contains an elaborate foundation on the basis of which it has
held that financial creditors belong to a class distinct from operational
creditors. This distinction was emphasised in the earlier decision in Swiss
H
974 SUPREME COURT REPORTS [2021] 8 S.C.R.

A Ribbons (supra), where a two-Judge Bench of the Court, speaking
through Justice R F Nariman, observed:
“51. Most importantly, financial creditors are, from the very
beginning, involved with assessing the viability of the corporate
debtor. They can, and therefore do, engage in restructuring of the
B loan as well as reorganisation of the corporate debtor’s business
when there is financial stress, which are things operational creditors
do not and cannot do. Thus, preserving the corporate debtor as a
going concern, while ensuring maximum recovery for all creditors
being the objective of the Code, financial creditors are clearly
different from operational creditors and therefore, there is
C obviously an intelligible differentia between the two which has a
direct relation to the objects sought to be achieved by the Code.”
38. In Essar Steel India Limited (supra), this Court held that
“the UNCITRAL Legislative Guide…makes it clear beyond any doubt
that equitable treatment is only of similarly situated creditors”20.The Court
D finally also observed that the ‘fair and equitable’ norm does not mean
that financial and operational creditors must be paid the same amounts
in any resolution plan before it can pass muster.On the contrary, it noted:
“88…Fair and equitable dealing of operational creditors’ rights
under the said regulation involves the resolution plan stating as to
E how it has dealt with the interests of operational creditors, which
is not the same thing as saying that they must be paid the same
amount of their debt proportionately. Also, the fact that the
operational creditors are given priority in payment over all financial
creditors does not lead to the conclusion that such payment must
F necessarily be the same recovery percentage as financial creditors.
So long as the provisions of the Code and the Regulations have
been met, it is the commercial wisdom of the requisite majority of
the Committee of Creditors which is to negotiate and accept a
resolution plan, which may involve differential payment to different
classes of creditors, together with negotiating with a prospective
G resolution applicant for better or different terms which may also
involve differences in distribution of amounts between different
classes of creditors.”

20
Available at <https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/
H uncitral/en/05-80722_ebook.pdf> accessed 6 August 2021, pg. 218
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 975
RELIANCE INFRATEL LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

The Court also noted that: A
“89...by vesting the Committee of Creditors with the discretion of
accepting resolution plans only with financial creditors, operational
creditors having no vote, the Code itself differentiates between
the two types of creditors.”
39. These decisions have laid down that the jurisdiction of the B
Adjudicating Authority and the Appellate Authority cannot extend into
entering upon merits of a business decision made bya requisite majority
of the CoC in its commercial wisdom.Nor is there a residual equitybased
jurisdiction in the Adjudicating Authority or the Appellate Authority to
interfere in this decision, so long as it is otherwise in conformity with the C
provisions of the IBC and the Regulationsunder the enactment.
40. Certain foreign jurisdictions allow resolution/reorganization
plans to be challenged on grounds of fairness and equity. One of the
grounds under which a company voluntary arrangement can be challenged
under the United Kingdom’s Insolvency Act, 1986 is that it unfairly D
prejudices the interests of a creditor of the company21. The United States’
US Bankruptcy Code provides that if a restructuring plan has to clamp
down on a dissenting class of creditors, one of the conditions that it
should satisfy is that it does not unfairly discriminate, and is fair and
equitable22. However, under the Indian insolvency regime, it appears
that a conscious choice has been made by the legislature to not confer E
any independent equity based jurisdiction on the Adjudicating Authority
other than the statutory requirements laid down under sub-Section (2) of
Section 30 of the IBC.
21
“Section 6 – Challenge of Decisions
1)Subject to this section, an application to the court may be made, by any of the F
persons specified below, on one or both of the following grounds, namely—
(a)that a voluntary arrangement which has effect under section 4A unfairly prejudices
the interests of a creditor, member or contributory of the company;
(b)that there has been some material irregularity at or in relation to the meeting of the
company, or in relation to the relevant qualifying decision procedure.”
22
‘‘Section 1129 – Confirmation of a Plan
[…]
G
(b) (1)Notwithstanding section 510(a) of this title, if all of the applicable requirements
of subsection (a) of this section other than paragraph (8) are met with respect to a plan,
the court, on request of the proponent of the plan, shall confirm the plan notwithstanding
the requirements of such paragraph if the plan does not discriminate unfairly, and is fair
and equitable, with respect to each class of claims or interests that is impaired under,
and has not accepted, the plan.” H
976 SUPREME COURT REPORTS [2021] 8 S.C.R.

A 41. An effort was made by Mr Dushyant Dave, learned Senior
Counsel, to persuade this Court to read the guarantees of fair procedure
and non-arbitrariness as emanating from the decision of this Court in
Maneka Gandhi vs Union of India23 into the provisions of the IBC.The
IBC, in our view, is a complete code in itself. It defines what isfair and
equitable treatment by constituting a comprehensive framework within
B
which the actors partake in the insolvency process. The process
envisaged by the IBC is a direct representation of certain economic
goals of the Indian economy. It is enacted after due deliberation in
Parliament and accords rights and obligations that are strictly regulated
and coordinated by the statute and its regulations. To argue that a residuary
C jurisdiction must be exercised to alter the delicate economic coordination
that is envisaged by the statute would do violence on its purpose and
would be an impermissible exercise of the Adjudicating Authority’s power
of judicial review. The UNCITRAL, in its Legislative Guide on Insolvency
Law, has succinctly prefaced its recommendations in the following
terms24:
D
“C. 15. Since an insolvency regime cannot fully protect the interests
of all parties, some of the key policy choices to be made when
designing an insolvency law relate to defining the broad goals of
the law (rescuing businesses in financial difficulty, protecting
employment, protecting the interests of creditors, encouraging the
E development of an entrepreneurial class) and achieving the desired
balance between the specific objectives identified above.
Insolvency laws achieve that balance by reapportioning the risks
of insolvency in a way that suits a State’s economic, social and
political goals. As such, an insolvency law can have widespread
F effects in the broader economy.”
Hence, once the requirements of the IBC have been fulfilled, the
Adjudicating Authority and the Appellate Authority are duty bound to
abide by the discipline of the statutory provisions. It needs no emphasis
that neither the Adjudicating Authority nor the Appellate Authority have
G an unchartered jurisdiction in equity. The jurisdiction arises within and as
a product of a statutory framework.

23
(1978) 1 SCC 248
24
Available at <https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/
uncitral/en/05-80722_ebook.pdf> accessed 6 August 2021,
H pg. 14-15
PRATAP TECHNOCRATS (P) LTD. v. MONITORING COMMITTEE OF 977
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D Conclusion A
42. In the present case, the resolution plan has been duly approved
by a requisite majority of the CoC in conformity with Section 30(4).
Whether or not some of the financial creditors were required to be
excluded from the CoC is of no consequence, once the plan is approved
by a 100 per cent voting share of the CoC. The jurisdiction of the B
Adjudicating Authority was confined by the provisions of Section31(1)
to determining whether the requirements of Section 30(2) have been
fulfilled in the plan as approved by the CoC. As such, once the
requirements of the statute have been duly fulfilled, the decisions of the
Adjudicating Authority and the Appellate Authority are in conformity
with law. C

43. For the above reasons, we find no merit in the appeal.The
appeal shall accordingly stand dismissed.
44. Pending application(s), if any, shall stand disposed of.
D
Nidhi Jain Appeal dismissed.

E

F

G

H