Paramjeet Singh Bhatia Resolution Professional Vs GSW Enterprise Private Limited (NCLT Allahabad)
The application was filed by the Resolution Professional under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking approval of the Resolution Plan under Section 31(1) for the Corporate Debtor after the Committee of Creditors (CoC) approved the plan with 87.54% voting share in its 31st meeting held on 28–29 May 2025. The Corporate Insolvency Resolution Process (CIRP) had commenced on 3 March 2023 pursuant to admission of a Section 7 application. The Interim Resolution Professional was subsequently confirmed as the Resolution Professional by the CoC.
Following commencement of CIRP, the Resolution Professional issued the statutory public announcement, invited claims from stakeholders, verified the claims, and constituted the CoC, which was reconstituted from time to time based on admitted claims. The final CoC comprised five financial creditors. During the CIRP, a total of 36 CoC meetings were held to consider various issues relating to claims, valuation, invitation of resolution plans, negotiations with prospective resolution applicants, and approval of the final resolution plan.
Initially, Form G inviting Expressions of Interest (EOIs) was published in May 2023. As no resolution plan was received within the stipulated period, fresh invitations were issued. The resolution process also faced significant hurdles because the Resolution Professional was unable to obtain possession and control of the Corporate Debtor’s factory premises and assets. Assistance was sought from the local administration, and after orders of the Adjudicating Authority, possession was finally obtained on 12 August 2024, following which a fresh invitation process was initiated.
Fresh Form G was published in August 2024. Eleven EOIs were initially received and eligible applicants were provided the Request for Resolution Plan (RFRP), Information Memorandum and Evaluation Matrix. Since the process did not culminate successfully, the CoC later approved recommencement of the process after granting further extensions and exclusions of time. Eventually, a fresh Form G was issued in January 2025. Six prospective resolution applicants participated, out of which only two submitted resolution plans by the final deadline of 15 March 2025.
The CoC undertook detailed evaluation of both plans, examined their feasibility, viability, compliance with Section 29A, liquidation value distribution and other statutory requirements. After negotiations, revised plans and addenda were submitted. The CoC also adopted the Swiss Challenge Mechanism during the evaluation process. Ultimately, the resolution plan submitted by the successful resolution applicant received 87.54% voting approval, while the competing resolution plan was not approved. Following approval, a Letter of Intent was issued and accepted, and the successful resolution applicant furnished the required performance security by adjusting the earnest money deposit and providing a bank guarantee.
The Tribunal examined whether the CIRP and the filing of the application were within the permissible statutory timeline. After considering the various extensions and exclusions previously granted, including exclusion of 243 days and further extensions, it held that the application had been filed within the subsisting CIRP period. The Tribunal also excluded, suo motu, the period from the filing of the approval application until the date of approval of the resolution plan in the interest of justice.
The successful resolution applicant was found eligible under Section 29A of the Code after submission of the required affidavit and verification by the Resolution Professional and the CoC. The Tribunal accepted that the applicant possessed the managerial, technical and financial capability required for implementation of the resolution plan.
During the hearing, the Tribunal sought several clarifications regarding the financial proposal. The original Form H reflected a total plan value of Rs. 295 crore, comprising Rs. 95 crore towards settlement of creditors and Rs. 200 crore proposed to be infused over five years for working capital and capital expenditure. The Tribunal required clarification regarding the source of this proposed infusion, adequacy of performance security and the actual resolution value. In response, the Resolution Professional clarified that the actual resolution amount payable to creditors was Rs. 95 crore, while the additional Rs. 200 crore represented future capital expenditure and working capital for revival of the Corporate Debtor and did not form part of the settlement payable to creditors.
Subsequently, the Resolution Professional filed a revised Form H. It was clarified that Rs. 30 crore would be infused towards refurbishment, plant revival and capacity enhancement, while the remaining Rs. 170 crore would represent projected reinvestment from future profits generated from operation of the Corporate Debtor over five years rather than an upfront investment. The successful resolution applicant also produced a comfort letter from a bank regarding proposed term loan and working capital facilities. Pursuant to further directions of the Tribunal, the CoC convened another meeting and formally took note of and approved the revised explanation regarding the source and manner of funding, again with 87.54% voting share.
Under the approved financial proposal, the total amount payable to creditors was Rs. 95 crore. The plan provided for settlement of secured financial creditors, operational creditors, workmen and employees, and other operational creditors. The CIRP costs already incurred had been met from compensation received from the Greater Chennai Corporation, and any further verified CIRP costs were to be paid in priority before any payment to creditors. The implementation schedule contemplated payment of settlement amounts within 90 days from the effective date, while the proposed capital expenditure and working capital infusion of Rs. 200 crore was to be introduced over a period of five years.
The Tribunal also examined the mandatory requirements under Sections 30 and 31 of the IBC and Regulations 37, 38 and 39 of the CIRP Regulations. It found that the resolution plan contained provisions relating to payment of CIRP costs, treatment of operational creditors, management and supervision of the Corporate Debtor, implementation schedule, statutory compliances, stakeholder interests, implementation mechanism and monitoring committee. The Resolution Professional also certified compliance with all statutory requirements in Form H.
Regarding avoidance transactions, the Tribunal noted that one application under Section 66 of the Code remained pending. The resolution plan specifically provided that proceedings relating to such transactions would continue under the responsibility of the financial creditors after the effective date. Any recoveries arising from such proceedings would accrue solely to the financial creditors, and any related tax consequences would also be borne by them.
The Tribunal referred to various decisions of the Supreme Court explaining the limited scope of judicial review in approval of resolution plans. It reiterated that commercial decisions of the CoC cannot ordinarily be interfered with once the requirements of Sections 30(2) and 31 of the Code are satisfied. The Tribunal observed that the resolution plan complied with the statutory framework and judicial principles governing approval of resolution plans.
While approving the plan, the Tribunal observed that the distribution mechanism among secured financial creditors remained subject to directions already issued in a separate application requiring reconsideration in accordance with Section 53 of the Code. The Resolution Professional and CoC were directed to make consequential adjustments in distribution without altering the total amount payable by the successful resolution applicant.
Accordingly, the Tribunal approved the resolution plan along with its addendum. The approved plan was declared binding on the Corporate Debtor, its employees, members, creditors, the Central Government, State Governments, local authorities and all stakeholders under Section 31(1). A Monitoring Committee comprising a representative of Punjab National Bank, the Resolution Professional and a nominee of the successful resolution applicant was constituted to supervise implementation and file monthly progress reports. The Tribunal further directed that, in case of non-compliance or withdrawal of the plan, the earnest money deposit of Rs. 2 crore and performance security of Rs. 7.5 crore would stand forfeited. The moratorium under Section 14 ceased to operate from the date of approval. Reliefs and concessions sought under the plan were granted to the extent permissible under Sections 31(4) and 32A of the IBC and in accordance with applicable Supreme Court decisions, while statutory approvals were directed to be obtained within one year wherever required.
FULL TEXT OF THE NCLT JUDGMENT/ORDER
