IBC- Once Resolution Plan Is Approved, No Modifications Are Permissible : Supreme Court

The Supreme Court has held that the declaration made by the NCLT to the effect that the trademarks “Deccan Chronicle” and “Andhra Bhoomi”, which originally belonged to Deccan Chronicle Holdings Ltd. (“DCHL/Corporate Debtor”), continues to be under the ownership of DCHL post the approval of resolution plan, would amount to impermissible modification of resolution plan as the same was silent on this aspect.The Bench comprising of Justice Ajay Rastogi and Justice Bela M. Trivedi upheld the NCLAT order wherein it was held that any right or ownership claimed after approval of Resolution Plan by CoC stands extinguished and accordingly the Successful Resolution Applicant could only use the Corporate Debtor’s existing trademarks without financial implication, but such trademarks could no longer be considered under ownership of the Corporate Debtor."...once the Resolution Plan stands approved, no alterations/modifications are permissible. It is either to be approved or disapproved, but any modification after approval of the Resolution Plan by the CoC, based on its commercial wisdom, is not open for judicial review unless it is found to be not in conformity with the mandate of the IBC Code", the bench observed.BACKGROUND FACTSDeccan Chronicle Holdings Ltd. (“Corporate Debtor/DCHL”) is engaged in the business of printing, publication and sale of daily newspapers under the trademarks named, “Deccan Chronicle” (English) and “Andhra Bhoomi” (Telugu). On 05.07.2017, the Corporate Debtor was admitted into the Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code, 2016 (“IBC”) by the National Company Law Tribunal (“NCLT”). SREI Multiple Asset Investment Trust Vision India Fund (“Successful Resolution Applicant/SRA”) submitted a Resolution Plan for the Corporate Debtor. The Clause 11.12 of the Resolution Plan provided that the NCLT would declare that the Corporate Debtor holds perpetual exclusive rights to use the trademarks, namely “Deccan Chronicle” and “Andhra Bhoomi”, without any financial implications.The Resolution Plan was approved by the Committee of Creditors (“CoC”) on 10.12.2018 with 81.39% of voting rights. In pursuance of Clause 11.12, an application was filed before the NCLT seeking a declaration that the Corporate Debtor is the owner of trademarks “Deccan Chronicle” and “Andhra Bhoomi” and the same shall be treated as part of its assets.Subsequently, the NCLT also approved the SRA’s Resolution Plan on 03.06.2019 while holding the same to be compliant of Section 30(2) of IBC, but subject to the outcome of above said application . On 14.08.2019, the NCLT held that the Corporate Debtor has the exclusive right to use the trademarks “Deccan Chronicle” and “Andhra Bhoomi” and these trademarks belong to the Corporate Debtor. When the Order dated 14.08.2019 was challenged before the National Company Law Appellate Tribunal (“NCLAT”), the NCLT’s order was set aside. The NCLAT observed that the ownership of the Corporate Debtor declared over the trademark after the approval of the Resolution Plan by the CoC, would amount to modification/alteration of the approved Resolution Plan, which is impermissible in law. Further, any right or ownership claimed after approval of Resolution Plan by CoC stands extinguished. The SRA challenged the NCLAT order before the Supreme Court contending that the observation regarding resolution plan being modified is misconceived. SUPREME COURT VERDICTThe Bench observed that when the NCLT approved the resolution plan, the Clause 11.12 stood approved to the extent of Corporate Debtor’s exclusive right to use the two trademarks, without financial implication. However, the declaration made regarding ownership of trademarks by the Corporate Debtor on 14.08.2019 does not reconcile with the Resolution Plan approved by the CoC and the NCLT. On the issue of whether declaration of Corporate Debtor’s ownership on trademarks would modify the resolution plan, the Bench observed as under:“It clearly indicates that what was approved by the CoC with 81.39% of its voting is to the effect that the Corporate Debtor has a perpetual exclusive right to use the brands, namely, “Deccan Chronicle” and “Andhra Bhoomi” and it nowhere indicates regarding the right of ownership over the trademarks/brands, “Deccan Chronicle” and “Andhra Bhoomi” of the Corporate Debtor. But the adjudicating authority while adjudicating application I.A.No.155 of 2018, apart from upholding the exclusive right to use the trademarks, “Deccan Chronicle” and “Andhra Bhoomi”, made a further declaration that trademarks belong to Corporate Debtor/DCHL under its order dated 14th August, 2019, which, in our view, was a modification/alteration in the approved Resolution Plan which indisputably is impermissible in law.”It was further observed that in terms of the approved Resolution Plan, it was the perpetual exclusive right to use the trademarks, “Deccan Chronicle” and “Andhra Bhoomi”, by the Corporate Debtor which ...

IBC- Once Resolution Plan Is Approved, No Modifications Are Permissible : Supreme Court

Pallavi Mishra

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IBC- Once Resolution Plan Is Approved, No Modifications Are Permissible : Supreme Court

Pallavi Mishra

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