NCLT’s order directing CoC to consider RP of other resolution applicants submitted after CIRP was unsustainable: NCLAT

Case Details: Mohammed Enterprises (Tanzania) Ltd. v. Alok Kailash Saxena Resolution Professional Associate Décor Ltd. - [2022] 145 taxmann.com 218 (NCLAT-Chennai)

Judiciary and Counsel Details

• • M. Venugopal, Judicial Member & Kanthi Narahari, Technical Member
  • Abhijeet Sinha, Adv. for the Appellant.
  • P.H. Arvindh Pandian, Sr. Adv. for the Respondent.

Facts of the Case

In the instant case, the Corporate Insolvency Resolution Process (CIRP) was initiated against the corporate debtor, and Resolution Professional (RP) was appointed. Later, he published an invitation for Expression of Interest (EoI) for the submission of a resolution plan.

The appellant-successful resolution applicant submitted its resolution plan, and the plan of the appellant was approved by the Committee of Creditors (CoC) with a 100 per cent voting share. The appellant, on being confirmed, also furnished a performance bank guarantee, and RP filed an application before NCLT seeking approval of the resolution plan of the appellant, however, in view of the outbreak of Covid 19 and the restriction on movement imposed, the hearing was not taken up.

Later, the Respondent placed a request before RP to submit a resolution plan, and the same was rejected by the RP on the grounds that the resolution plan of the appellant had already been approved by the CoC and an application for approval of the plan had already been filed by the RP before the Adjudicating Authority.

Consequently, Respondent filed an application before NCLT for approval of the resolution plan and to give directions to RP to place the resolution plan before CoC for its consideration. The NCLT disposed of the application filed by the appellant seeking approval of the resolution plan.

On appeal, the appellant submitted that the NCLT, without approving or rejecting the resolution plan of the appellant, disposed of the application filed by the appellant.

The appellant further submitted that the Respondent earlier submitted an EOI to submit a resolution plan for the corporate debtor, however, they backed out of the process and did not submit any resolution plan within date specified for submission of the resolution plan. The appellant also submitted that the CIRP period had already been concluded and no resolution plan could have been accepted thereafter.

NCLAT Held

Hon’ble NCLAT observed that the NCLT is not authorized to pass any order which would circumvent and attempt to frustrate the resolution plan pending before it for consideration. Further, NCLAT held that the respondent once backed out from participating in the resolution process, after completion of CIRP period their application could not be considered.

Therefore, the order of the NCLT allowing the application of respondent for consideration of their resolution plan was unsustainable and the same was to be set aside.

List of Cases Reviewed

• • Order of NCLT (Chennai) in [I.A. no. 227/2020 and 225/2020 in C.P. (IB) No. 51/BB/2018], dated 28-5-2021 (para 43) reversed.
  • Ebix Singapore (P.) Ltd. v. Committee of Creditors of Educomp Solution Ltd. [2021] 130 taxmann.com 208 (SC)/[2021] SCC online SC 707 (para 30)
  • Kalinga Allied Industries India (P.) Ltd. v. Hindustan Coils Ltd. [2021] 125 taxmann.com 202/164 SCL 565 (NCLAT)/2021 SCC online NCLAT 51
  • Shrawan Kumar Aggrawal Consortium v. Rituraj Steel (P.) Ltd. [2020] 117 taxmann.com 302/160 SCL 210 (NCLAT)/2020 SCC Online NCLAT 380 (para 40) approved.

List of Cases Referred to

• • Committee of Creditors of Essar Steel (India) Ltd. v. Satish Kumar Gupta [2019] 111 taxmann.com 234 (SC)/[2020] 8 SCC 531 (para 8)
  • Kalpraj Dharamshi v. Kotak Investment Advisors Ltd. [2021] 125 taxmann.com 194/166 SCL 583 (SC)/2021 SCC Online SC 204 (para 9)
  • Kalinga Allied Industries (India) (P.) Ltd. v. Hindustan Coils Ltd. [2021] 125 taxmann.com 202/164 SCL 565 (NCLAT)/2021 SCC Online NCLAT 51 (para 9)
  • Quinn Logistics India (P.) Ltd. v. Macks of Soft Tech (P.) Ltd. [2018] 96 taxmann.com 63 (NCLAT – Chennai) (para 13)
  • Pioneer Rubchem v. Vivek Raheja [Company Appeal (AT) (Ins) No. 706 of 2020, dated 25-8-2020] (para 28)
  • Ebix Singapore (P.) Ltd. v. Committee of Creditors of Educomp Solution Ltd. [2021] 130 taxmann.com 208 (SC)/2021 SCC Online SC 707 (para 29)
  • Committee of Creditors of Meenakshi Energy Ltd. v. Consortium of Prudent ARC Ltd. & Vizag Minerals and Logistics (P.) Ltd. [2021] 133 taxmann.com 353 (NCLAT – Chennai) (para 32)
  • K. Sashidhar v. Indian Overseas Bank [2019] 102 taxmann.com 139/152 SCL 312 (SC)/[2012] 12 SCC 150 (para 34)
  • Shrawan Kumar Agrawal Consortium v. Rituraj Steel (P.) Ltd. [2020] 117 taxmann.com 302/160 SCL 210 (NCLAT)/2020 SCC Online NCLAT 380 (para 39).