- Bench: Justices Rohinton Fali Nariman, Aniruddha Bose, V. Ramasubramanian
- Appellant: Maharashtra Seamless Ltd
- Respondent: Padmanabha Venkatesh & Ors.
Issue
- Whether the scheme of the Code contemplates that the sum forming part of the resolution plan should match the liquidation value or not?
- Whether Section 12-A of the Code is the applicable route through which a successful resolution Applicant can retreat?
- While approving a resolution plan, can the Adjudicating Authority reassess a resolution plan approved by the Committee of Creditors, even if the same otherwise complies with the requirement of Section 31 of the Code?
Facts
• The present appeal was filed by an Indian Bank which being the financial creditor in this case, under Section 7 of Insolvency and Bankruptcy Code, 2016. The total debt of the corporate debtor (CD) (United Seamless Tubulaar Private Limited) was Rs. 1897 crores, out of which Rs. 1652 crores comprised of term loans from two entities DB International (Asia) Limited and Deutsche Bank AG, Singapore Branch. There was also debt on account of working capital borrowing of Rs. 245 crores from Indian Bank.
• The Interim Resolution Professional and Resolution professional carried out the necessary actions as prescribed under the CIRP.
• On appointing a registered valuers for the valuation of corporate debtor, it was found that there was a difference in the aforesaid valuation and a different value was appointed. Accordingly, the average of the two closest estimates of valuation, the liquidation value was assessed to be Rs. 432.92 crore.
• The Resolution Professional received four Resolution Plans after being called for Expression of Interest following with the Request for Resolution Plans. The Resolution Plans were placed before COC (Committee of Creditors). The plan submitted by Maharashtra Seamless Limited was approved by majority of the COC by 87.10% of the votes.
• In the present case the application was filed by Resolution Professional for the approval of Resolution Plan for United Seamless Tubulaar Private Limited under section 30(6) and 31 of IBC, 2016 along with regulation 39 (4) of IBBI (Insolvency Resolution for Corporate Persons) and Rule 11 of NCLT Rules, 2016. The approval was in respect with the Resolution Plan submitted by Resolution Applicant – M/s Maharashtra Seamless Limited.
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• The tribunal passed detailed order to re-determine the liquidation value of the Corporate Debtor and then placed the revised Resolution Plan before COC for voting which was not duly followed by the RP. NCLAT directed the adjudicating authority to pass order under section 31 of IBC, 2016 uninfluenced by the previous order.
• The RP filed an application under section 30 and 31 of IBC, 2016 along with regulation 39 (4) of IBBI (Insolvency Resolution for Corporate Persons). The RP also informed the tribunal about the order of the adjudicating authority to re determine the liquidation value was complied, which was now at Rs. 597.54 crores as compared to previous amount of Rs. 439.92 crores.
Appellant's Contentions
• The successful RA Contended that it is willing to pay the verified Operational Creditors at the same percentage as that of the Financial Creditors i.e. 25 per cent which shall be paid within 30 days after the approval.
Respondent's Contention
• It emphasised that there could be no reason to release property valued at Rs.597.54 crores to MSL for Rs.477 crores. Learned counsel appearing for these two respondents sought to strengthen their submission on this point referring to the other Resolution Applicant whose bid was for Rs.490 crores which is more than that of the appellant MSL.
• It was submitted that no provision in the Code or Regulations has been brought to our notice under which the bid of any Resolution Applicant has to match liquidation value arrived at in the manner provided in Clause 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
Judgement
The appeal of MSL was allowed and the order of the NCLAT was set aside.
Relevant Paragraphs
"It appears to us that the object behind prescribing such valuation process is to assist the CoC to take decision on a resolution plan properly. Once, a resolution plan is approved by the CoC, the statutory mandate on the Adjudicating Authority under Section 31(1) of the Code is to ascertain that a resolution plan meets the requirement of sub-sections (2) and (4) of Section 30 thereof. We, per se, do not find any breach of the said provisions in the order of the Adjudicating Authority in approving the resolution plan."
