NCLT have Jurisdiction to send back Resolution Plan for Modification: NCLAT allows to Prepare Addendum to Incorporate Necessary Modification

The New Delhi bench of the National Company Law Appellate Tribunal( NCLAT ) held that National Company Law Tribunal (NCLT) have Jurisdiction to send back Resolution Plan for Modification under certain circumstance and is allowed to prepare Addendum to incorporate necessary modification.

Ocean Capital Market Ltd, the appellant is a Successful Resolution Applicant who challenged the order passed by the Adjudicating Authority (National Company Law Tribunal), by which order the application filed by the Resolution Professional for approval of the Resolution Plan of the Appellant has been rejected and the IAs filed by the Dissenting Financial Creditors objecting the plan have been allowed. 

The Corporate Insolvency Resolution Process (CIRP) of Corporate Debtor - ARSS Infrastructure Projects Ltd., Resolution Plan submitted by the Appellant was deliberated in the meeting of the CoC held on 30.11.2022 and as a result of the voting in favour of the plan by 76.67%, the plan was approved.

The Resolution Professional filed an application before the Adjudicating Authority for approval of the Resolution Plan approved by the CoC. Punjab National Bank, who was a Dissenting Financial Creditor having a 16.47% vote share filed an objection to the Resolution Plan. Bank of India, another Dissenting Financial Creditor having a vote share of 3.16% filed an objection to the Resolution Plan vide I.A. No. 55 of 2023. Another Dissenting Financial Creditor, Kotak Mahindra Bank Ltd. having a 0.64% vote share also filed his objection.

The Adjudicating Authority by the impugned order allowed the objections by the Dissenting Financial Creditors and rejected the application filed by the Resolution Professional for approval of the Resolution Plan.  The Adjudicating Authority took the view that the Resolution Plan which provided for the assignment of securities of Dissenting Financial Creditors to the Resolution Applicant is contrary to provisions of Section 128 of the Contract Act, hence, objections filed by the Dissenting Financial Creditors deserve to be allowed. 

Shri Arun Kathpalia, senior counsel appearing for the Appellant submitted that in the Resolution Plan relevant clause which provides for the assignment of security interest in favour of the Appellant was voted upon by the CoC and no objection was raised at any point of time by the Dissenting Financial Creditors. 

It was submitted that plan also includes an additional payment of Rs.40 Crores for the assignment of securities. The counsel appearing for the Punjab National Bank, Bank of India and Kotak Mahindra Bank submitted that the affidavit submitted by the Appellant on 20.02.2023 was not sufficient to allay the objections of the Respondents.

The Resolution Plan required modification and as submitted before the Adjudicating Authority on behalf of the Bank, the Resolution Plan ought to have been sent back to the CoC for consideration of the Revised Plan. 

The affidavit filed by the Successful Resolution Applicant on 20.02.2023 has also been noted by the Adjudicating Authority.  The submission of the Dissenting Financial Creditor was also noted that if, in the event, any amendment/modification needs to be carried out, the plan should be remitted back to the CoC for further consideration and the Resolution Plan cannot be acted upon the Affidavit. 

The Adjudicating Authority after noticing the aforesaid submission proceeded to reject the Resolution Plan observing that once the Resolution Plan has been approved by the CoC, the Adjudicating Authority has either to approve the plan or reject the plan and there is no other alternative to approve the plan with modification. 

A Coram comprising Justice Ashok Bhushan, Chairperson and Barun Mitra, Member (Technical) observed that “ends of justice be served in permitting the Successful Resolution Applicant to prepare an Addendum to the Resolution Plan incorporating condition as given in the Affidavit, which Addendum be placed before the CoC for voting by the Resolution Professional.”

 “After the decision of the CoC, in the event, the CoC decides to approve the Addendum, the Addendum as well as the Resolution Plan be submitted before the Adjudicating Authority for fresh consideration.”, the NCLAT held.

To Read the full text of the Order CLICK HERE

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