On A Request Made By CoC, NCLT Is Empowered To Remand Back Resolution Plan To CoC For Re-Consideration: NCLT Ahmedabad

Background Facts

Asset Reconstruction Company (India) Ltd. ("Financial Creditor/Applicant") had filed a petition under Section 7 of the Insolvency and Bankruptcy Act, 2016, seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against Steel Industries Ltd. ("Corporate Debtor"). The Adjudicating Authority admitted the petition and CIRP was initiated 02.05.2019.

Nivaya Resources Private Limited ("Successful Resolution Applicant/SRA") had submitted a resolution plan for the Corporate Debtor which was approved by the Committee of Creditors ("CoC") with 82.41 % votes. Consequently, the Resolution Professional had filed an application before the Adjudicating Authority for approval of the Plan.

After approval of the Plan by CoC, it came into light that the parent company of the SRA, i.e., Gulf Petrochem FCZ, was declared bankrupt and there is a freezing injunction on the Promoters. The credit rating of the SRA was in default as on 04.06.2021 and it had also defaulted as a Successful Resolution Applicant in CIRP of M/s. Allied Strips Ltd. and M/s. Tirupati Infraprojects Pvt. Ltd.

The CoC passed a resolution with 96.95% votes to seek permission of Adjudicating Authority for reconsideration of the resolution plan submitted by SRA for better prospects of resolution. Accordingly, an application was filed before the Adjudicating Authority.

Contentions Of The Applicant

The Applicant submitted that permission be given to reconsider the resolution plan and call for new resolution plans from fresh proposed applicants if required, as the SRA had given false undertaking in the Plan and had misrepresented. Re-consideration of the Plan would aid in achieving timely and successful resolution of the Corporate Debtor; maximizing the value of the Corporate Debtor; and ensuring that Resolution Plan gets fully implemented.

Issue

Whether a resolution plan which is already approved by the CoC, and which is pending before the Adjudicating Authority for approval can be withdrawn for reconsideration by the CoC on the discovery of new facts and events relating to the resolution applicant and whether the Adjudicating Authority is empowered to send back the resolution plan, on such request, to the CoC?

Decision Of The NCLT

The NCLT Bench observed that it was well within its rights to send back the resolution plan for reconsideration to the CoC, on request made by the CoC in its commercial wisdom. Reliance was placed on NCLAT judgment in Bank of Maharashtra v Videocon Industries Ltd. & Ors., CA (AT) (Ins) No. 503 of 2021, wherein it was held that Adjudicating Authority is competent to send back a resolution plan to the CoC for re-consideration. The application was allowed and the Resolution Plan was remanded back to CoC for re-consideration.

Case Title: Asset Reconstruction Company (India) Limited v GPT Steel Industries Ltd., CP (IB) No./157/AHM/NCLT/ 2018

Counsel For the SRA: Sr. Adv. Mr. Virender Ganda

Counsel For the COC: Adv. Deep Roy

Counsel For the RP: Adv. Mr. Monaal Davawala a.w. RP Mr. Divyesh Desai

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