'IBC Prevails Over SEZ Act', Supreme Court Rejects Noida SEZ's Claim

The Supreme Court dismissed the Noida Special Economic Zone's (NSEZ) plea challenging the NCLAT's decision to approve a resolution plan that granted Rs. 50 Lacs against NSEZ's admitted claim of about Rs. 6 Crore.

The NCLAT reduced the claim amount, partly due to penalties related to the renewal of the sub-lease and transfer charges.

The bench comprising Justices Abhay S. Oka and Augustine George Masih ruled that the Insolvency and Bankruptcy Code (IBC) prevails over the SEZ Act due to Section 238 of IBC's overriding effect, rejecting NSEZ's argument for exemptions from such payments.

“As far as the submission of the Learned Senior Counsel that exemptions from NSEZ payments, including any type of fees or penalty for renewal of sub-lease and/or for transfer charges due with regard to the change of directorship or shareholding in favour of the Resolution Applicant has to be dealt with as per Clause 10.9 of the Resolution Plan cannot be accepted in the light of Section 238 of IBC 2016, which provides for the provisions of IBC 2016 to have an overriding effect over the other laws. If that be so, the obvious effect is that the same would prevail, leading to the provisions as contained in the SEZ Act 2005 giving way to IBC 2016.”, the judgment authored by Justice Masih said.

Corporate Debtor's Liquidation Value Can't Be Questioned If Based On Relevant Material Placed On Record

The appellant argued that the resolution plan's approval was flawed due to the improper valuation of the corporate debtor, as no physical inspection was conducted, violating Regulation 35(1)(a) of the Insolvency and Bankruptcy Board regulations.

The Court dismissed this argument while drawing reference from the case of Duncans Industries Ltd. v. State of U.P. and Others (2000), and held that valuation is a factual matter that requires no interference if supported by relevant material.

“As stated above, the average of the two closest estimates given by the valuers were taken into consideration as fair value and liquidation value respectively, which were found to be just and reasonable. This would be, keeping in view Section 35C of IBC 2016, where the powers and duties of the liquidator have been laid down. Since due process appears to have been followed no fault is found requiring interference.”, the court reasoned.

Since the Resolution Plan had already been implemented and the dues as found payable under the Resolution Plan have been disbursed to the concerned parties including the Appellant, thus the appeal was dismissed and the resolution plan was approved.

Appearance:

For Appellant(s) Mr. Manish Singhvi, Sr. Adv. Mr. Anshul Rawat, Adv. Mr. Saurabh George, Adv. Ms. Manju Jetley, AOR

For Respondent(s) Mr. Gopal Jain, Sr. Adv. Mr. Abhishek Anand, Adv. Ms. Mithu Jain, AOR Mr. Karan Kohli, Adv. Mr. Krishna Sharma, Adv. Mr. Kunal Godhwani, Adv. Mr. Karan Batura, AOR Ms. Kinjal Chadha, Adv.

Case Title: Noida Special Economic Zone Authority Vs. Manish Agarwal & Ors., CIVIL APPEAL NOS. 5918-5919 OF 2022

Citation : 2024 LiveLaw (SC) 858

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