Citing the legal position laid down by the Supreme Court recently, the Chennai bench of the National Company Law Tribunal (NCLT) has dismissed an application by UK-based industrial and metals company Liberty House group, challenging the rejection of its resolution plan for Chennai-based beleaguered renewable power infrastructure solution provider, Infinitas Energy Solutions.
The bench of Mohd Sharief Tariq ruled that the resolution professional, the adjudicating authority or appellate authority, were not empowered to reverse the commercial decision of committee of creditors (CoC).
In view of the reasons recorded by the CoC for rejection of the resolution plan by Liberty House and the legal proposition laid down by the apex court, the resolution applicant has no vested right to challenge the rejection of its resolution plan, he said.
The SC had ruled that the NCLT has no authority to evaluate the commercial decision of the CoC to approve or reject a proposed resolution plan in K Sashidhar vs Indian Overseas Bank case. The SC said that there was no provision in the Insolvency and Bankruptcy Code (IBC) that empowers the resolution professional or the adjudicating authorities (NCLT & NCLAT) to reverse the commercial decision of the CoC.
According to Liberty House, which filed the plea against the rejection, the main issue it wanted to get an answer was as to whether the liquidation of the corporate debtor (Infinitas Energy) can be permitted if a resolution plan is rejected for reasons extraneous to the scheme of the IBC.
Liberty House had proposed to infuse money in excess of Rs 100 crore to run Infinitas Energy and thereby increasing the possibility of the contingent payments being realised. However, CoC rejected the proposal and filed for the liquidation of the company, it added.
Infinitas Energy Solutions, formerly known as Trishe Renewable Energy Solutions, was dragged to NCLT by one of its lenders, Indian Bank, alleging a default of over Rs 41-crore loan and subsequently corporate insolvency resolution process was ordered on September 18, 2017. The financially-troubled company also had loan defaults towards a slew of other banks, including Punjab National Bank.
The main contention of the CoC was that creditors would be subject to significant haircut if the resolution plan is accepted and offer materially lower than the one time settlement offer made by the company in 2016. The CoC pointed out that the financial creditors are possessed with better recovery options than that proposed by the resolution applicant.
The NCLT bench observed that the CoC, while rejecting or accepting the resolution plan, is under obligation to strike a balance between the interests of the creditors and corporate debtor.
The element of realisibility under the resolution plan or liquidation is an important aspect which the CoC has to keep in mind at the time of making decisions. The resolution applicant or the promoters cannot thrust their will on the creditors who have already been pushed to odd position with regard to the recovery of their legitimate dues.
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