NCLAT Approves Resolution Plan Of Shell Company Despite SEBI's Objections

The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal filed by the market regulator SEBI against the NCLT, Guwahati's approval to the Resolution Plan submitted by Abu-Dhabi based 'BRS Ventures Investment Ltd.' for the Corporate Debtor 'Assam Company India Limited. (ACIL)'

Corporate Insolvency Resolution Process (CIRP) was initiated against ACIL on 26th October, 2017.

The NCLT Guwahati Bench had observed that the resolution plan was approved by 100% voting share of the Committee of Creditors, and was in consonance with Section 30(2) of the Insolvency and Bankruptcy Code, 2016 ('I&B Code')

Section 30(2) of the I&B Code requires the Resolution Professional (RP) to examine each resolution plan received by him, to confirm that it provides for the payment of CIRP costs, management of the affairs of the Company after approval of the resolution plan, and an effective implementation and supervision of the plan.

The Tribunal at Guwahati was informed that a letter dated 9^th June, 2017 was forwarded to SEBI by the Ministry of Corporate Affairs (MCA), which the MCA had received from the Serious Fraud Investigation Office (SFIO). The Letter contained a list of 331 shell companies, with ACIL being one of them. On receiving the letter, investigation into the matter was initiated by SEBI, and a forensic auditor was appointed to verify misrepresentation of the funds and business of ACIL.

A Writ Petition was also filed by ACIL challenging the MCA and SFIO letter, wherein a single bench had quashed the MCA's letter but not the SFIO letter. Against this decision, ACIL went into appeal and a division bench of the Guwahati High Court has reserved its order after hearing the parties.

SEBI challenged the NCLT's approval given to the resolution plan for ACIL on 20th September, 2018 on the ground that the resolution plan under a chapter 'Restructuring of Capital', provided for 'Delisting of Equity Shares' of ACIL. SEBI contended that if the shares were delisted from the NSE and BSE, it will not only render the examination against ACIL nugatory and ineffective, but also consequently compel Public Share Holders to exit for a very meagre amount, thus hurting the interest of investors and the Securities market.

ACIL in its defence submitted that, apart from protecting rights of all the stakeholders, the rights of Public Shareholders have also been protected under the resolution plan. BRS Adventures told the Tribunal that it has provided for an exit route to the public shareholders by earmarking Rs.1.82 crores for cancellation of their shares and no individual or entity having any dues has been deprived of any amount under the approved resolution plan.

When NCLT approved the above resolution plan of BRS Adventures, SEBI approached the NCLAT against the Tribunal's decision by way of an appeal.

The NCLAT after having heard the parties, was of the view that the approved resolution plan was not in contravention of any law for the time being in force, and, therefore, will not attract Section 30(2)(e) of the I&B Code.

As per Section 30(2)(e) of I&B Code, the resolution plan should not contravene any of the provisions of law for the time being in force.

In the absence of any material irregularity in exercising the powers by the RP during the CIRP, or regarding provision for payment of insolvency resolution costs in the resolution plan, the appeal was found to be not maintainable by the NCLAT, and was dismissed.