NCLT not the right forum to determine, while approving the resolution plan

Undischarged insolvency under the 29A?

The National Company Law Tribunal (NCLT) made observations with respect to the ‘undisputed insolvent’ under Section 29A of the Insolvency and Bankruptcy Code (IBC), it was made while approving the resolution plan submitted by TATA Steel for BHUSHAN ENERGY.

This plan was opposed by Naveen Singhal, the ex-promoter of Bhushan Energy and Bhushan Steel resulted in lower fair market value for Bhushan Energy.

In regard to this three issues were raised:-

Whether a ‘body corporate’ can be ‘undischarged insolvent’ under IBC or is it only individuals? The NCLT found that on a reading of various provisions a body corporate can also be ‘undischarged insolvent’ under the IBC.

Can a company under CIRP be called ‘undischarged insolvent ‘? The NCLT noted that Section 7 and Section 9 proceedings are summary proceedings for the determination of default, which are not conclusive. The NCLT further noted that CIRP is a rescue process while a company is under CIRP, it cannot be said to be ‘undischarged insolvent’

Is NCLT the right forum for determination of who is ‘undischarged insolvent’? The NCLT noted that the determination of who is ‘undischarged insolvent’ has been vested with a court of competent jurisdiction, which isn’t under the IBC. However, who is the competent authority to determine this question, has not been answered.