Maharashtra Seamless Limited Versus Padmanabhan Venkatesh & Ors.
Court / Forum : Supreme Court of India
Case Number : Civil Appeal Nos. 4242 and 4967-4968 of 2019
Coram : Justice R.F. Nariman, Justice Aniruddha Bose, Justice V. Ramasubramanian
Subject : Sections 12A of the Insolvency and Bankruptcy Code, 2016
Date of Decision : January 22, 2020
Brief Facts
- The appeal was filed by Maharashtra Seamless Limited, the successful resolution applicant against the order of NCLAT, by which the resolution applicant was directed to modify the resolution plan.
- The grounds for such a modification were that it was below the liquidating value of the corporate debtor and that the operational creditors were not treated at par with the financial creditors.
Issues
- Whether the scheme of the Insolvency and Bankruptcy Code, 2016 (“Code”) contemplates that the sum forming part of the resolution plan should match the liquidating value or not?
- Whether Section 12A of the Code is the applicable route through which a successful resolution applicant can retreat?
Decision
- While deciding the first issue the Hon’ble Supreme Court held as follows: -
“No provision in the Code or Regulations has been brought to our notice under which the bid of any Resolution Applicant has to match liquidating value arrived at in the manner provided in Clause 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.”
- The Hon’ble Supreme Court found no breach in the order of NCLT and further stated that object behind prescribing such valuation process is to assist committee of creditors (“CoC”) to take decision on a resolution plan properly.
- Since the resolution plan is approved by the CoC, the statutory mandate on the Adjudicating Authority under Section 31(1) of the Code is to ascertain that a resolution plan meets the requirement of Section 30(2) and (4) of the Code.
- The Hon’ble Supreme Court also relied on the decision of CoC of Essar Steel India Limited v. Satish Kumar Gupta & Ors.[1], and observed that NCLAT exceeded its jurisdiction by interfering with the commercial wisdom of the CoC, rather than assessing the resolution plan on the basis of quantitative analysis, which is the scheme of the Code.
- While deciding the second issue, the Hon’ble Supreme Court held that, the withdrawal from the plan under Section 12A of the Code by citing financial difficulties is not available to a resolution applicant. The procedure envisaged in the said provision only applies to applicants invoking Sections 7, 9 and 10 of the Code.
- While allowing the appeal, the Hon’ble Supreme Court concluded that in the present case the objective is to implement the resolution plan and the successful resolution applicant cannot be permitted to take a contrary stand in an application filed in connection with the very same appeal.
[1] 2019 SCC OnLine SC 1478
