The NCLT, Indore Bench expounded that a conditional plan without the consent of all the secured financial creditors is in contravention of the IBC.
It was opined that the Committee of Creditors (“CoC”) can only take decisions concerning the insolvency of the Corporate Debtor. Under the pretext of commercial wisdom, the right of a secured financial creditor to proceed against the personal guarantor of the Corporate Debtor cannot be extinguished.
It was enunciated that the CoC by majority votes cannot enforce its decision for extinguishment of the right of the dissenting creditor to proceed against the personal guarantor
Brief Facts:
The present application [IA 190(MP)] has been instituted under Section 30(6) read with Section 31 of the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) by Mr. Naveen Kumar Sood- Resolution Professional (RP) of the Corporate Debtor- Ujaas Energy Limited for approval of the Resolution Plan submitted by a consortium of SVA Family Welfare Trust and M&B Switchgear.
Another application [ IA/165(MP)] has been filed by the operational creditor- Satec Envir Engineering (India) Private Limited objecting to the resolution plan submitted by the consortium of SVA Family Welfare Trust and M&B Switchgears being the related party of the corporate debtor.
Contentions of the RP:
The Corporate Debtor was admitted to the Corporate Insolvency Resolution Process (“CIRP”). Thereafter, the IRP made a public announcement of the CIRP of the Corporate Debtor and called upon its creditors to submit claims with requisite proof. After the CoC was formed, 4 resolution plans were received, one of which was by the Resolution Applicant (a consortium of SVA Family Welfare Trust and M&B Switchgear).
The NCLT vide order approved the replacement of the IRP and appointed Mr. Naveen Kumar Sood as RP in place of Mr. Navin Khandelwal.
The resolution plan submitted by a consortium of SVA Family Welfare Trust and M&B Switchgears was approved by the CoC. The Bank of Baroda, a member of CoC with a 5.83% voting share submitted that the said resolution plan seeks the extinguishment of liability of personal guarantors of the Corporate Debtor and the Resolution Applicant proposed a sum of Rs.2,49,42,613/- along with extinguishment of personal guarantee on the loan given by them (Bank of Baroda). The plan has been accepted by other lender banks, but the Bank of Baroda objected.
Further, Applications under section 95 of the IBC by the Bank of Baroda against the personal guarantors are pending before the NCLT. It was also submitted that the Resolution Applicant was ineligible under section 29A to submit the resolution plan as Corporate Debtor was admitted into CIRP before the MSME registration. It was contended that the Corporate Debtor being an MSME was eligible to submit a resolution plan as per Section 29A read with 240A of the IBC.
Contentions of the Operational Creditor:
It was argued that the assets exceed the liabilities and therefore, the Corporate Debtor was in a position to pay off the liabilities. It was contended that the said resolution plan submitted by the Corporate Debtor does not even include the debt of the original operational creditor which was admitted by the RP. Therefore, the said resolution plan should be rejected.
Observations of the Tribunal:
It was observed that the resolution plan submitted by a consortium of SVA Family Welfare Trust and M&B Switchgears was approved by the COC with 78.04% votes. The said resolution plan was submitted by the related party. As per Section 240A, the Corporate Debtor being MSME, would not be ineligible under section 29A of the IBC. It was opined that Section 29A(c) to (h) would not apply though the Resolution Applicant was a related party.
The Bench further noted that the Operational Creditor had no locus standi to file such an application and hence, his application was rejected.
Concerning the objection by the Bank of Baroda, it was expounded that a conditional plan without the consent of all the secured financial creditors is in contravention of the IBC.
It was opined that CoC can only take decisions concerning the insolvency of the Corporate Debtor. Under the pretext of commercial wisdom, the right of a secured financial creditor to proceed against the personal guarantor of the Corporate Debtor cannot be extinguished.
It was enunciated that the CoC by majority votes cannot enforce its decision for extinguishment of the right of the dissenting creditor to proceed against the personal guarantor
The decision of the Tribunal:
Based on the above-mentioned reasons, IA 190 of 2021 was also rejected and disposed of.
Case Title: Naveen Kumar Sood RP of Ujaas Energy Ltd. And Satec Envir Engineering (India) Pvt Ltd v/s Ujaas Energy Ltd
Coram: Dr. Madan B. Gosavi, (Judicial Member), Kaushalendra Kumar Singh (Technical Member)
Case No: IA/190(MP)2021, IA/165(MP)2022 in CP (IB) 9 of 2020
Advocates for the Petitioner: Ld. Sr. Counsel Mr. Saurabh Soparkar a.w. Ld. Counsel Mr. Rohit Dubey (IA 190 of 2021) Ld Counsel Ms. Mily Ghoshal
Advocate for the Respondent: Ld. Counsel Mr. Nipun Singhvi
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