Explained| Why Supreme Court Set Aside JSW's Resolution Plan For Bhushan Steel & Power Ltd

The Supreme Court in its recent decision to set aside the Resolution Plan submitted by JSW Steel for Bhushan Steel and Power Ltd, flagged the various procedural non-compliances done by the Resolution Professional and lack of commercial wisdom exercised by the Committee of Creditors (Coc)Holding that the Resolution Plan of JSW was illegal and contrary to the provisions of the Insolvency and Bankruptcy Code(IBC), a bench comprising Justice Bela M Trivedi and Justice Satish Chandra Sharma stated that the Committee of Creditors(Coc) should not have accepted it. The bench also faulted the National Company Law Tribunal for approving the Resolution Plan. The CIRP proceedings were triggered against BPSL at the instance of Punjab National Bank in 2017. JSW Steel's resolution plan for acquiring Bhushan Power & Steel Ltd (BPSL) involved a total payment of ₹19,700 crore. This comprised ₹19,350 crore allocated to financial creditors and ₹350 crore to operational creditors, against their claims of ₹733 crore. The NCLT has approved the resolution plan proposed by the Succesful Resolution Applicant (SRA)-JSW on 5.09.3019; however, certain modifications were made and the Tribunal imposed certain conditions upon the SRA. These conditions were then challenged by SRA in an appeal before NCLAT. Appeals were also filed by creditors/ erstwhile directors, including 'Mr. Sanjay Singhal,' 'Kalyani Transco,' 'Jaldhi Overseas,' 'Medi Carrier,' 'CJ Darcl Logistics' and 'State of Odisha & Others.'The impugned order dated 17.02.2020 approved the judgment and order dated 05.09.2020 passed by the NCLT, subject to the modifications/clarifications made by it in its impugned judgment. The NCLAT thus allowed the appeal by JSW and dismissed other company appeals. It made changes to the earlier conditions set by the NCLT order. The NCLAT order was then challenged before the present bench through a batch of appeals filed by promoters of the corporate debtor and its creditors. The bench set aside the Resolution Plan by JSW mainly on the following five aspects: (1) Non-Compliance With Time Lines Prescribed Under S. 12 IBC 2016 The Court noted that since the CIRP was initiated on 26.07.2017, the applicability of S.12 IBC will be considered as it stood before the 2019 Amendment. Thus, the Court referred to the decision in Arcelormittal India Private Limited vs. Satish Kumar Gupta and Others which held S. 12 (1) to be of mandatory nature. S. 12 reads : (1) Subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period of one hundred and eighty days from the date of admission of the application to initiate such process.(2) The resolution professional shall file an application to the Adjudicating Authority to extend the period of the corporate insolvency resolution process beyond one hundred and eighty days, if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of sixty-six per cent. of the voting shares.Proviso (1) reads : Provided that any extension of the period of corporate insolvency resolution process under this section shall not be granted more than once. The Court observed that "it is explicitly made clear that the provision contained in Section 12(1) is mandatory in nature as the expression “shall be completed” is used. Sub-section (3) further makes it clear that the duration of 180 days may be extended further “but not exceeding 90 days”, meaning thereby a maximum of 270 days' time limit is statutorily laid down. The proviso to Section 12 also further clarifies that the extension of period of CIRP under the said Section shall not be granted more than once. Therefore, there remains no shadow of doubt that prior to insertion of two provisos by way of amendment in Section 12 which came into force w.e.f 16.08.2018, the entire CIRP proceedings had to be completed within maximum period of 270 days from the date of admission of the Application to initiate such process."Applying the above to the facts of the case, the Court noted that the date 26.07.2017 was the date of admission of the Application to initiate the CIRP against the Corporate Debtor BPSL. The appointment of Mr. Khandelwal as the Resolution Professional was confirmed by the CoC in its first meeting held on 01.09.2017. However, the company application was submitted by the RP only on 14.2.2019, which is almost after one and a half years. It further observed that RP had not filed any extension application as mandated under S.12(2). The RP had also not complied with Regulation 39(4) Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. As per Regulation 39(4), the RP is required to submit the Resolution Plan approved by the CoC to the Adjudicating Authority at least 15 days before the maximum period for completion of CIRP under Section 12. In factual terms, the Court observed : "It appears that though the e-voting process was conducted on...

Explained| Why Supreme Court Set Aside JSW's Resolution Plan For Bhushan Steel & Power Ltd

Anmol Kaur Bawa

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