Resolution Plan Providing For Extinguishment Of Personal Guarantees & Securities Of Dissenting Financial Creditors Is Not Violative Of Section 30(2) Of IBC: NCLAT Delhi
Pallavi Mishra
29 Nov 2023 6:00 AM GMT
The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has held that a resolution plan providing for extinguishment of security interest and personal guarantees of dissenting financial creditors is not violative of Section 30(2) of IBC. The Bench has approved the...
The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has held that a resolution plan providing for extinguishment of security interest and personal guarantees of dissenting financial creditors is not violative of Section 30(2) of IBC.
The Bench has approved the Resolution Plan submitted by Puro Naturals JV for Shivaji Cane Processors Limited.
Background Facts
Shivaji Cane Processors Limited (“Corporate Debtor”) is engaged in the business of sugar industry and cane processing.
On 18.02.2021, the NCLT admitted the Corporate Debtor into Corporate Insolvency Resolution Process (“CIRP”).
Puro Naturals JV (“Successful Resolution Applicant/SRA”) submitted a Resolution Plan for the Corporate Debtor, which was approved by the Committee of Creditors (“CoC”) with a majority voting share of 78.03%. Shree Warana Sahakari Bank Limited and Kolhapur Urban Co-operative Bank (“Dissenting Creditors”) having the vote share of 11.13% and 10.84% respectively, dissented with the Resolution Plan.
Accordingly, the Resolution Professional filed an application under Section 30(6) of IBC before the NCLT, seeking approval of the Resolution Plan. The Dissenting Creditors filed objection to the Resolution Plan.
On 01.05.2023, the NCLT rejected the resolution plan on the premise that the same seeks to extinguish the personal guarantees and securities without the consent of dissenting Financial Creditors. Reliance was placed on the NCLT Indore Bench verdict in Naveen Kumar Sood RP of Ujaas Energy Ltd. & Anr. vs. Ujaas Energy Ltd. & Ors., wherein a Resolution Plan was rejected for extinguishing the rights of the dissenting Financial Creditors to proceed against the Personal Guarantor.
The SRA filed an appeal before the NCLAT against the NCLT Order.
Issue
Whether Resolution Plan providing for extinguishment of security interest and the guarantees of the Financial Creditors including dissenting Financial Creditors is contrary to the provision of Section 30(2) of IBC and the CIRP Regulations?
NCLAT Verdict
The Bench observed that the NCLT order in Naveen Kumar Sood RP of Ujaas Energy Ltd. & Anr. vs. Ujaas Energy Ltd. & Ors. was challenged before the NCLAT in SVA Family Welfare Trust & Anr. vs. Ujaas Energy Ltd. & Ors., Company Appeal (AT) (Ins.) No.266 of 2023. In appeal, the NCLAT had set aside the NCLT order while holding that security interest of the dissenting Financial Creditors by virtue of personal guarantee of the ex-director of the Corporate Debtor could have been very well dealt in the Resolution Plan. Further, Resolution Plan providing for extinguishment of personal guarantee as approved by the CoC, does not contravene Section 30(2)(e) of IBC.
It was held that the NCLT could not have rejected the resolution plan based on a judgment which has been set aside by NCLAT.
The Bench has further held that a resolution plan providing for extinguishment of security interest and personal guarantees of the Financial Creditors, including dissenting Financial Creditors, is not contrary to Section 30(2) of IBC and the CIRP Regulations.
“The present is a case where CoC deliberated over the issue and on such deliberation and inputs, the Successful Resolution Applicant submitted revised Resolution Plan and the Resolution Plan dealt with security interest and the personal guarantee also. We, thus, answer Question No.(I) holding that Resolution Plan in question has consciously dealt with securities and personal guarantees given to the Financial Creditors including the dissenting Financial Creditors and the said clauses of the Resolution Plan do not contravene any provisions of Section 30, sub-section (2) as well as CIRP Regulations, 2016.”
The Bench has approved the Resolution Plan of Puro Naturals JV for the Corporate Debtor.
Case Title: Puro Naturals JV v Warana Sahakari Bank & Ors.
Case No.: Company Appeal (AT) (Insolvency) Nos.661-663 of 2023
Counsel for Appellant: Mr. Amar Dave, Mr. Abhinav Agrawal, Mr. Kartik Sharma, Advocates. Mr. Abhijit Naik, SRA (in-person). Mr. Krishnendu Datta, Sr. Advocate, Mr. Ramachandra Madan, Ms. Neha Agarwal, Mr. Agam, Advocates for RP. Mr. Siddharth S. Chapalgaonkar, Ms. Sneha Botwe, Mr. Gajanan Tirthkar, Advocates.
Counsel for Respondents: Mr. Sumant Batra, Ms. Apoorva Chowdhary, Advocates for R-1 and R-2. PCA Udayraj Patwardhan.
