NCLAT has upheld the takeover of the debt-ridden Dighi Port by Adani Ports & Special Economic Zone (APSEZ) confirming the order of the Adjudicating Authority (NCLT) which had approved the resolution plan of APSEZ in March, 2020.
The said order was impugned by the Director and promoter of Dighi Ports Mr. Vijay Kalantri who assailed the order on grounds that it did not take into account his objections to the plan and its approval by the Committee of Creditors and failed to appreciate the merit of the settlement proposal submitted by his company Balaji Infra Projects Limited over the resolution plan of APSEZ.
Dighi Port, promoted by Kalantri and being developed by his company Balaji Infra Projects Limited owes over Rs. 3000 crores to its lenders and was going through a corporate insolvency resolution process which began on the instance of its creditors. The promoter company Balaji Infra Projects Limited had made a settlement offer of Rs. 680 crores to the financial creditors but the same was rejected by the Committee of Creditors when the promoters failed to deposit the Earnest Money for consideration of its final proposal and also failed to disclose the source of its funds to the creditors.
The Court appraised itself of the entire controversy around the selection of APSEZ's approval plan by the Committee of Creditors of the debt-ridden port over other plans and recorded the finding that as long as the approved resolution plan was in compliance of Section 30 of the Insolvency and Bankruptcy Code (IB Code) and in conformity with other laws, its selection over other plans by the Committee of Creditors was not open to judicial review, as long as such selection was not arbitrarily concluded. The Court noted that
"This argument, in the nature of such settlement offer being superior to the approved Resolution Plan of 'APSEZ' in the context of financial matrix, viability and feasibility, cannot be accepted for the simple reason that the decision regarding feasibility and viability of a Resolution Plan qua the intended objective of 'I&B Code' is essentially a business decision resting upon commercial wisdom of the 'Committee of Creditors' and is not amenable to judicial review/ justiciable in law."
The three judge bench comprising Justice Bansi Lal Bhat, Justice Jarat Kumar Jain Member and Shreesha Merla also noted that the said appeal by the promoters was another attempt to frustrate the 'Corporate Insolvency Resolution Process' and thwart all attempts at resolution of the 'Corporate Insolvency' and revival of the 'Corporate Debtor' thereby jeopardising the legitimate interests of all stakeholders and defeating the object of legislation.
The petitioner had further raised an objection to the approved plan on the ground that it violated Section 30(2) (e) of the IB Code which requires that a plan should not contravene any provision of law as it breached Section 31(4) of the IB Code.
According to the petitioner, the proviso to Section 31(4) requires that if a resolution plan contains a provision for combination, it must obtain the approval of the Competition Commission of India before being approved by the Committee of Creditors. The plan of APSEZ had no such permission when it was submitted to the Committee of Creditors by APSEZ. He argued that the plan could not have been approved under Section 31 of the IB Code by the Adjudicating Authority until the mandate of Section 30(2) (e) was fulfilled.
The Court rejected this objection to the plan raised by the petitioner by clarifying that the statutory requirement of Section 31(4) was only declaratory in nature and stated that the plan was not in violation of Section 30(2)(e) of the IB Code. The Court relied on the ruling in Arcelormittal India Pvt. Ltd. v. Abhijit Guhathakurta─ Company Appeal (AT) (Insolvency) No. 524 of 2019 that the requirement of a resolution plan to obtain approval of the Competition Commission of India even before its approval by the Committee of Creditors was only directory in nature and not mandatory and stated that
"It is manifestly clear that a Resolution Plan containing provision for combination has been treated as a class apart requiring approval of the Competition Commission of India even prior to such Resolution Plan being approved by the Committee of Creditors. However, treating such requirement as mandatory is fraught with serious consequences."