The National Company Law Tribunal (NCLT) Hyderabad bench has ruled that under Section 31(1) of the Insolvency and Bankruptcy Code (IBC), 2016, the Adjudicating Authority does not have powers to terminate or remand back a resolution plan to the Committee of Creditors for re-consideration.
The Hyderabad Bench of NCLT, comprising Judicial member Bhaskara Pantula Mohan and Technical member Binod Kumar Sinha, observed on Monday that an assessment can only be made to see whether the plan incorporates provisions for its smooth implementation or not.
It said the resolution plan submitted by JSW Energy Ltd has been approved for Ind-Barath Energy (Utkal) Ltd.
An application was filed by Bank of Baroda under Section 7 of IBC, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against Ind-Barath Energy (Utkal) Ltd (Corporate Debtor).
The Hyderabad Bench of NCLT (Adjudicating Authority) vide an order dated August 29, 2018, had admitted the application and initiated the CIRP. Udayraj Patwardhan was initially appointed as the Interim Resolution Professional and subsequently as the Resolution Professional.
A Resolution Plan was submitted by the M/s JSW Energy Ltd (Successful Resolution Applicant) for the Corporate Debtor, which was approved by the Committee of Creditors (CoC) with 82.70 per cent votes on October 9, 2019.
An IA No 882/2019 was filed by the RP, seeking approval of Resolution Plan by the Adjudicating Authority.
During the pendency of IA No 882/2019, SRA filed an application bearing IA No 24/2021, seeking permission to withdraw its own Resolution Plan, which was pending approval and dismissal of IA No 882/2019.
SRA sought withdrawal by invoking the Material Alteration Clause (MAC) of its Resolution Plan over the premise that the asset value of Corporate Debtor had significantly eroded due to the Resolution Professional’s negligence.
The Adjudicating Authority had dismissed the IA No 24/2021, while relying on the Supreme Court judgement in Ebix Singapore Pvt Ltd vs CoC of Educomp Solutions Ltd & Anr, civil appeal no 3324 of 2020, wherein it was held that the Adjudicating Authority does not have power to permit withdrawal of the Resolution Plan.
SRA then filed objections to its own Resolution Plan in IA No 882/2019, stating that the same cannot be implemented, owing to the eroded value of Corporate Debtor’s assets due to delay in approval of Resolution Plan and failure of the Resolution Professional to preserve the value of assets.
As per the Resolution Professional, SRA had sought same relief in IA No 24/2021 and the objections filed in IA No 882/2019 and was merely finding a way to wriggle out of its own Resolution Plan by blaming the Resolution Professional for negligence. It said the SRA cannot object to the approval of its own Resolution Plan again and again on same facts.
SRA had submitted that under Section 31(1) of IBC, the Adjudicating Authority could terminate a resolution plan, which was incapable of being implemented.
The Tribunal ruled that SRA, through its objections, was attempting to achieve the same object as in IA No 24/2021, which was withdrawal from CIRP in the present stage.
The Bench placed reliance on the Supreme Court verdict in Ebix Singapore Pvt Ltd vs CoC of Educomp Solutions Ltd. & Anr., Civil Appeal No 3324 of 2020. The residual powers available to the Adjudicating Authority under Section 60 (5) of IBC cannot be used to create procedural remedies entailing substantive outcome on the insolvency process, noted the Tribunal.
It said the Resolution Plan submitted by SRA was in accordance with law and accordingly, the Resolution Plan of JSW Energy Ltd was approved for Ind-Barath Energy (Utkal) Ltd.
Senior Advocate K. Venugopal and Advocate Niraj Kumar represented the Resolution Professional, while Senior Advocate Gopal Jain and D. Narendra Naik appeared for the Resolution Applicant.
Solicitor General of India and Senior Advocate Tushar Mehta, along with Advocate Ramakant Rai, represented Financial Creditors.