CoC Has Authority To Modify Resolution Plan To Comply With Directions Of Supreme Court: NCLAT
The NCLAT has affirmed that the CoC is empowered to modify the resolution plan in order to comply with the directions issued by the Supreme Court. In this case,while resolution plan was pending before the Adjudicating Authority, the Supreme Court passed its decision in State Tax Officer in which it was held that the debts owed to a secured creditor, which would include the State under...
The NCLAT has affirmed that the CoC is empowered to modify the resolution plan in order to comply with the directions issued by the Supreme Court. In this case,while resolution plan was pending before the Adjudicating Authority, the Supreme Court passed its decision in State Tax Officer in which it was held that the debts owed to a secured creditor, which would include the State under the GVAT Act, are to rank equally with other specified debts including debts on account of workman's dues for a period of 24 months preceding the liquidation commencement date.
Brief Facts
This Appeal by a Successful Resolution Applicant (SRA) has been filed challenging the Order dated 01.05.2024 passed in I.A. 961/2024 filed by the Resolution Professional (RP). The Adjudicating Authority allowed Prayer (c) of the Application, aggrieved by which Order, this Appeal has been filed.
The Corporate Debtor, Mastana Foods Private Limited came to be admitted in Corporate Insolvency Resolution Process (CIRP) by Order dated 18.09.2019.In response to `Form-G' issued by the RP, Resolution Plan was submitted and in the 10th Committee of Creditors (CoC) Meeting held on 07.11.2020, Resolution Plan of the Appellant along with the Addendum dated 12.10.2020 was duly approved by 100% CoC.
The Excise & Taxation Officer, Officer-Cum-Assessing Authority, Kaithal State of Haryana filed an I.A. 95/2021 & I.A. 1374/2021 before the Adjudicating Authority which was allowed on 16.02.2021 and 16.04.2021. This Appellate Tribunal vide Order dated 22.03.2022, set aside the Orders of Adjudicating Authority dated 16.02.2021 and 06.04.2021.
On 06.09.2022, the Hon'ble Supreme Court delivered its Judgment in the matter of `State Tax Officer' Vs. `Rainbow Papers Limited', (2022) .Hon'ble Supreme Court vide its Order dated 31.10.2022 stayed the operation of the Order dated 22.03.2021 passed by this Appellate Tribunal.
Hon'ble Supreme Court vide Order dated 22.01.2024 allowed the Civil Appeals filed by the Excise & Taxation Officer, Officer-Cum-Assessing Authority setting aside the Order dated 22.03.2022 passed by the Appellate Tribunal in view of the decision of the Hon'ble Supreme Court in `State Tax Officer' (Supra). After the Judgment of the Hon'ble Supreme Court I.A. 961/2024 was filed by the RP before the Adjudicating Authority. Adjudicating Authority who has reserved the Judgment in I.A. 5283/2022, i.e. Plan approval Application de-reserved the same.
By Order dated 01.05.2024, Adjudicating Authority disposed of the Application, I.A. 961/2024, allowing the Prayer (c), aggrieved by which Order this Appeal has been filed.
Contentions
The appellant submitted that the Resolution Plan of the Appellant has been approved by the CoC with 100% votes and after the Judgment of the Hon'ble Supreme Court dated 22.01.2024, Appellant has filed an Affidavit on 18.03.2024, where it offered to undertake the entire liability of Excise & Taxation Officer, Officer-Cum-Assessing Authority.
That when Appellant has agreed to accept the entire liability of Excise & Taxation Officer, Officer-Cum-Assessing Authority, no further steps were required except to consider the Plan approval Application which is pending before the Adjudicating Authority and that Hon'ble Supreme Court only intended that Order of the Hon'ble Supreme Court in `State Tax Officer' (Supra) be complied with, no direction was issued to start the CIRP Process denovo.
The RP submitted that it is the CoC which is empowered to take all decision regarding CIRP Process and CIRP Process is conducted under the CoC. Hence it is for the CoC to take a call with regard to further steps.
Per contra, Unsuccessful Resolution Applicant submitted that the clear intendment of the Order of the Hon'ble Supreme Court was that a fresh CIRP process be conducted and that had the Hon'ble Supreme Court not intended to initiate fresh CIRP Process, there was no occasion to grant 90 days time for completing the process.
NCLAT's Analysis
The tribunal after perusing the relevant orders and materials noted that Directions issued by the Hon'ble Supreme Court in `State Tax Officer' (Supra), have been noticed by the Adjudicating Authority in the Order and has thereafter disposed of the Application. The Prayer (c) which was allowed was “direct and pass appropriate Orders for Applicant to conduct the ongoing Corporate Insolvency Resolution Process for M/s. Mastana Food Private Ltd”.
The tribunal further noted that from the facts noted above, it is clear that under the Order passed by the Hon'ble Supreme Court in the Appeal filed by Excise & Taxation Officer, Officer-Cum-Assessing Authority, the process was to be completed within 90 days and for taking steps in pursuance of the Order of the Hon'ble Supreme Court dated 22.01.2024, I.A. was filed by the RP.
Adjudicating Authority by the Impugned Order has allowed the Application in terms of Prayer (c) but has not issued any direction as to what process, RP has to conduct. The expression used is “conduct the ongoing Corporate Insolvency Resolution Process for M/s. Mastana Foods Private Limited”, the tribunal noted.
The tribunal further noted that in `M.K. Rajagopalan' Vs. `Dr. Periasamy Palani Gounder & Anr.' reported in (2024) the Supreme Court has held that whatever be the reason, the Plan has to be presented to the CoC and could have been presented to the Adjudicating Authority only after final approval of the CoC.
The tribunal observed that thus, in view of the Order of the Hon'ble Supreme Court, the CoC has to take a final call with regard to Resolution Plan or modification therein or to take such steps as has been directed by the Hon'ble Supreme Court.
The tribunal concluded that in view of the facts and Orders passed by the Hon'ble Supreme Court, as noted above, ends of justice be served in disposing the Appeal permitting the RP to place an agenda before the CoC with regard to necessary steps which are required to be taken in the CIRP of the Corporate Debtor in pursuance of the directions of the Hon'ble Supreme Court dated 22.01.2024 in Civil Appeal No. 7514–7515/2022. It is the CoC which is in overall control of the entire CIRP Process to take such steps as required by law.
Case Title: Meenakshi and Kushal Goyal Versus Amit Agarwal and Ors.
Case Reference: Company Appeal (AT) (Insolvency) No. 1022 of 2024
Judgment Date: 18/11/2024