NCLT Disallows JSW To Withdraw From Status Of Successful Resolution Applicant Of Ind-Barath Energy

The National Company Law Tribunal, Hyderabad Bench, comprising of Bhaskara Pantula Mohan (Judicial Member) and Dr. Binod Kumar Sinha (Technical Member), while adjudicating an application filed in Bank of Baroda v Ind-Barath Energy (Utkal) Ltd., has held that under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 ("IBC"), Adjudicating Authority is not empowered to terminate or remand back a resolution plan to the Committee of Creditors for re-consideration, an assessment can only be made to see whether the plan incorporates provisions for its smooth implementation or not. Further, the resolution plan submitted by JSW Energy Ltd. has been approved for Ind-Barath Energy (Utkal) Ltd. Background Facts Bank of Baroda had filed an application under Section 7 of the IBC, seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against Ind-Barath Energy (Utkal) Ltd. ("Corporate Debtor"). The NCLT, Hyderabad Bench ("Adjudicating Authority") vide an order dated 29.08.2018 had admitted the application and CIRP was initiated. Mr. Udayraj Patwardhan was appointed as the Interim Resolution Professional and subsequently as the Resolution Professional. M/s JSW Energy Ltd. ("Successful Resolution Applicant"/ "SRA") had submitted a Resolution Plan for the Corporate Debtor which was approved by the Committee of Creditors ("CoC") with 82.70% votes on 09.10.2019. The Resolution Professional had filed an I.A. No. 882/2019 seeking approval of Resolution Plan by the Adjudicating Authority. During the pendency of I.A. No. 882/2019, the SRA had filed an application bearing I.A. No. 24/2021, seeking permission to withdraw its own Resolution Plan which was pending approval and dismissal of I.A. No. 882/2019. The SRA had 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 I.A. No. 24/2021 while relying on the Supreme Court judgment in Ebix Singapore Pvt. Ltd. v 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. Thereafter, the SRA filed objections to its own Resolution Plan in I.A. 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. Contentions Of The Resolution Professional The Resolution Professional contended that the SRA had sought same relief in I.A. No. 24/2021 and the objections filed in I.A. No. 882/2019 and was merely finding a way to wriggle out of its own Resolution Plan by blaming the Resolution Professional for negligence. The SRA cannot object to the approval of its own Resolution Plan again and again on same facts. Contentions Of The SRA The SRA had submitted that under the proviso to Section 31(1) of the IBC, the Adjudicating Authority can terminate a resolution plan which is incapable of being implemented. Issues Whether the Adjudicating Authority can look into the issues of deterioration of assets after approval of Resolution Plan by unassailable majority of CoC Members again to decide as to whether the CoC approved resolution plan is capable of effective implementation or not? Relevant Law Section 31 of the IBC "31. Approval of resolution plan – (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 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 owed, guarantors and other stakeholders involved in the resolution plan: PROVIDED that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation. Decision Of The Adjudicating Authority Power under Section 31(1) The Bench observed that Section 31(1) of the IBC was incorporated to ensure that the Resolution Plan itself contains provisions for its effective implementation. The Adjudicating Authority has to look into the various provisions of the Resolution Plan to satisfy itself that once Resolution Plan is approved by it, there are sufficient checks and balances, demarcation of responsibilities and...

NCLT Disallows JSW To Withdraw From Status Of Successful Resolution Applicant Of Ind-Barath Energy

Pallavi Mishra

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