Corporate Debtor Cannot Be Sent Into Liquidation Just Because Liquidation Value Is More Than The Value Of The Resolution Plan: NCLT Kolkata

NCLT Kolkata Bench comprising Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member), while deciding interim applications in the matter of Ramsarup Industries Ltd., has held that just because the liquidation value is being projected higher than the value of the resolution plan, the Corporate Debtor cannot be sent into liquidation for this reason alone. The object of the IBC is to put the Corporate Debtor back on its feet for the larger benefit of all the stakeholders, not just the creditors. Ramsarup Industries Limited ("Corporate Debtor/Corporate Applicant") had approached the Adjudicating Authority of NCLT, Kolkata under Section 10 of the IBC and was accordingly admitted to Corporate Insolvency Resolution Process ('CIRP') on 08.01.2018. The common order dated 07.04.2022 has been passed by the NCLT Bench while deciding three interim applications together filed by various stakeholders in the matter. Background Of The Dispute After the Corporate Debtor was admitted to CIRP, a resolution plan was submitted by SS Natural Resources Ltd. ("Successful Resolution Applicant"/ "SRA") which was approved by the CoC with 74.41% of voting share. Subsequently, the resolution plan was approved by Adjudicating Authority (NCLT, Kolkata) on 04.09.2019. A monitoring agency to oversee the implementation of the successful resolution plan was constituted consisting of 6 members, i.e. the Resolution Professional, 2 members of SRA, 3 representatives of CoC namely CFM Asset Reconstruction Private Limited ("CFM-ARC"), Punjab National Bank ("PNB") and Axis Bank Limited ("Axis Bank"). The SRA had gone in appeal before the NCLAT stating that NCLT had materially altered its Resolution Plan by imposing additional financial obligations. The NLCAT dismissed the appeal vide an order dated 04.03.2021 and directed the Monitoring Agency to commence the implementation of the Resolution Plan, failing which, an application for liquidation of Corporate Debtor was liable to be moved before NCLT. The SRA went in appeal before the Supreme Court challenging the order dated 04.03.2021, nonetheless, the appeal was dismissed vide an order dated 04.05.2021 stating lack of substantial question of law. Another appeal was filed by Vanguard Credit & Holdings Pvt. Ltd. ("Vanguard") from same order of NCLAT dated 04.03.2021 before the Supreme Court. During the pendency of the Vanguard's appeal, the SRA did not take any steps for implementation of the plan and waited for the decision of the Supreme Court. Eventually the Vanguard's appeal was also dismissed by the Supreme Court vide an order dated 02.07.2021. The Chairman of the Monitoring Agency had issued a notice dated 17.05.2021 calling for 7th meeting of the Agency on 20.05.2021. In the said meeting the SRA had expressed its willingness to implement the Resolution Plan subject to some conditions; it also declined to give consent for release the upfront payment to meet CIRP cost; and objected to the utilization of performance security until the Vanguard appeal was pending before the Supreme Court. Other members of Monitoring Agency apprised the SRA regarding the need for unconditional implementation of the Resolution Plan and demanded that SRA should compensate the Financial Creditors for delay in implementation of the plan. Thereafter, on 23.05.2021 the SRA had addressed an email to the Monitoring Agency, highlighting that the demand to compensate Financial Creditors is unjustified; sought permission for depositing the CIRP cost in an Escrow account and that the disbursement of CIRP cost, Performance Security and interest thereon be kept on hold until the Vanguard's appeal is decided by the Apex Court. These circumstances led to filing of three interim applications before the Adjudicating Authority, NCLT Kolkata by CFM-ARC and SRA. Three Interim Applications Filed Before NCLT, KolkataIA (IB) No.538/KB/2021 It was filed on 08.06.2021 by CFM-ARC against the SRA and the Monitoring Agency under Sections 33(3), 33(4) and 60(5) of the Insolvency and Bankruptcy Code, 2016 ("IBC") seeking liquidation of the Corporate Debtor; a direction to the Monitoring Agency to forfeit the Performance Security amount deposited by the SRA under regulation 36B(4A) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and to utilize the same towards CIRP costs and other outstanding expenses; and to appoint a liquidator.IA (IB) No.635/KB/2021 The second application was filed by the SRA against the erstwhile Resolution Professional and CFM-ARC under Section 60(5) of the IBC seeking directions to the respondents to cooperate in the implementation of the approved Resolution Plan.IA (IB) No.628/KB/2021 The third application was filed by CFM-ARC against the SRA and the Monitoring Agency under Section 60(5) of the IBC seeking payment of interest by the SRA from the date of approval ...

Corporate Debtor Cannot Be Sent Into Liquidation Just Because Liquidation Value Is More Than The Value Of The Resolution Plan: NCLT Kolkata

Pallavi Mishra

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