In re Ramsarup Industries Limited (NCLT Kolkata)
Facts- Ramsarup Industries Limited (Corporate Debtor/Corporate Applicant) had approached the Adjudicating Authority of NCLT u/s 10 of the IBC and was admitted to Corporate Insolvency Resolution Process (‘CIRP’) on 08.01.2018. The common order dated 07.04.2022 has been passed by the NCLT Bench while deciding three interim applications together filed by various stakeholders in the matter.
A resolution plan was submitted by SS Natural Resources Ltd. (“Successful Resolution Applicant”/ “SRA”) which was approved by the CoC with 74.41% of voting share. Subsequently, the resolution plan was approved by Adjudicating Authority on 04.09.2019. A monitoring agency to oversee the implementation of the successful resolution plan was constituted consisting of 6 members.
The SRA had gone in appeal before the NCLAT stating that NCLT had materially altered its Resolution Plan by imposing additional financial obligations. The NCLAT dismissed the appeal and directed the Monitoring Agency to commence the implementation of the Resolution Plan, failing which, an application for liquidation of Corporate Debtor was liable to be moved before NCLT. The SRA went in appeal before the SC challenging the order dated 04.03.2021, nonetheless, the appeal was dismissed stating lack of substantial question of law. Another appeal was filed by Vanguard Credit & Holdings Pvt. Ltd. from same order of NCLAT before SC. During the pendency of the Vanguard’s appeal, the SRA did not take any steps for implementation of the plan and waited for the decision of the SC. Eventually the Vanguard’s appeal was also dismissed by the SC.
The Chairman of the Monitoring Agency had issued a notice dated 17.05.2021 calling for 7th meeting of the Agency on 20.05.2021. In the said meeting the SRA had expressed its willingness to implement the Resolution Plan subject to some conditions; it also declined to give consent for release the upfront payment to meet CIRP cost; and objected to the utilization of performance security until the Vanguard appeal was pending before the Supreme Court. Other members of Monitoring Agency apprised the SRA regarding the need for unconditional implementation of the Resolution Plan and demanded that SRA should compensate the Financial Creditors for delay in implementation of the plan.
Thereafter, on 23.05.2021 the SRA had addressed an email to the Monitoring Agency, highlighting that the demand to compensate Financial Creditors is unjustified; sought permission for depositing the CIRP cost in an Escrow account and that the disbursement of CIRP cost, Performance Security and interest thereon be kept on hold until the Vanguard’s appeal is decided by the Apex Court.
Due to these circumstances three interim applications were filed before the Adjudicating Authority, NCLT by CFM-ARC and SRA.
Conclusion- Liquidation should be the last resort, when everything else has been attempted and failed. In the present case, we have a successful resolution applicant who is ready and willing to implement the approved resolution plan as it is. Although there were some delays in the insolvency resolution process of the corporate debtor, attributable to the fact that many appeals came to be filed right upto the Supreme Court, we now have a situation where the SRA which has parked the entire resolution amount in an account separately earmarked for this purpose. This amount is now ready and available for utilisation by various stakeholders.
Sending the Corporate Debtor into liquidation just because the liquidation value is more than the enterprise value, would not be in keeping with the objectives of the Code. The Code is not about maximising value at all costs even if it means corporate death, which will inevitably ensue if the company is sent into liquidation. The challenge in IA (IB) No.538/ KB/2021 to the implementation of the approved Resolution Plan must, therefore, fail on this touchstone.
FULL TEXT OF THE NCLT JUDGMENT/ORDER
