The NCLAT, Chennai has opined that Section 238 of the of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”)  is superior to the provisions of the SARFAESI Act, 2002. It was further noticed that the resolution plan was approved with a majority of 98.70%.

It was ruled that the commercial wisdom of the committee of creditors is non-justifiable. Noting that the RBI has also asserted that prior permission is not required, the Bench held that the resolution plan should not have been rejected.  

Brief Facts:

The present appeal has been filed against the order of the NCLT vide which the application under Section 31(1) of the IBC filed by the Resolution Professional seeking approval of the resolution plan was dismissed.

Contentions of the Appellant:

It was argued that the NCLT had wrongly rejected the plan on the grounds that it had become a ‘Conditional Resolution Plan’ subject to the approval of RBI as one of the co-resolution applicants was an ARC.

It was further submitted that even though ARC was a co-resolution applicant, it was not proposing to acquire equity shareholding, therefore the plan ought not to have been rejected.

Contentions of the RBI:

It was submitted that the impleadment of the RBI was not necessary as it is not a necessary party.

Observations of the Tribunal:

The issue to be adjudicated was whether prior approval of the RBI is required for participating as a Resolution Co-Applicant under IBC.

The Tribunal opined that Section 238 of the IBC is superior to the provisions of the SARFAESI Act, 2002. It was further noticed that the resolution plan was approved with a majority of 98.70%.

It was further ruled that the commercial wisdom of the committee of creditors is non-justifiable. Noting that the RBI has also asserted that prior permission is not required, the Bench held that the resolution plan should not have been rejected.

The decision of the Tribunal:

Based on the aforementioned findings, it was the matter was remanded back to the NCLT for approval of the resolution plan.

Case Title: Puissant Towers India Pvt. Ltd. V. Neueon Towers Ltd. & Ors.

Coram: Justice M. Venugopal (Judicial Member), Ms. Shreesha Merla (Technical Member)

Case No.: Company Appeal (AT) (CH) (Ins) No. 181/2022

Advocate for Appellant: Adv. Mr. Sandeep Bajaj

Advocate for RBI: Adv. Mr. Chevanan Mohan

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