Supreme Court Ruling on Approval of Insolvency Resolution Plans | Study Guides, Projects, Research Insurance law

MANU/SC/0189/2019

Equi va lent/ Neut ral Ci tatio n:AI R2019 SC 1329 , I I(2019) BC 253 (SC ), 2019 (2 ) C C C  332 , [2019]148 C LA497 (SC ), [2019]213 C omp Ca s35 6(SC ),

(2019)2C o mpL J1(S C ), 2019(2)C T C 321, 2019/I NSC /148,  2019(3)S C ALE6, (2019) 12SC C 15 0, 2019 (8) SC J 118, [2019]152S C L312(S C ),

[2019]3S C R845

INTHESUPREMECOURTOFINDIA

CivilAppealNos.10673,10719,10971and29181of2018

DecidedOn:05.02.2019

K.SashidharVs.IndianOverseasBankandOrs.

Hon'bleJudges/Coram:

A.M.KhanwilkarandAjayRastogi,JJ.

Counsels:

For Appearing Parties:C.U. Singh, A.M. Singhvi, Colin Gonsalves, Shyam Divan, Sr.

Advs.,G. RamakrishnaPrasad,SuyodhanByrapaneni,FilzaMoonis, Mohd. Wasay Khan,

John Mathew,Karthik S.D .,B harat J. Jo shi, Advs.,Shikhil Suri,Shiv Kumar Suri,Kamal

Deep Dayal, Shilpa Saini, Vinishma Kaul, Saakshi Mago, Ram Lal Roy, Gauri Rasgotra,

Animesh Bisht, KaranKhanna, Siddhant Sharma, Advs. fo r Cyril Amarchand Mangaldas,

Kunal Tandon, Pragya Baghel, Niti Jain, Richa, Mahima Singh, Ritesh Kumar, Pranab

KumarMullick,SomaMullick,SebatKumarDeuria,PrabhaSwami, DivyaSwami,Soumik

Ghosal,V.K.SajithandT.N.DurgaPrasad,Advs.

CaseCategory:

COMPANYLAW,MRTPANDALLIEDMATTERS

CaseNote:

Company - R ejection of resolution plan - Initiation of liquidation process -

Challenge thereto - Sections 30, 31, 33, 61 of Insolvency and Bankruptcy

Code, 2016 (I & B C ode)-Appealswasagainstimpugned orderofNC LATan

High CourtdismissingappealfiledbyAppellantobservingthat,requirementof

approval of resoluti on plan by vote of not l ess than 75% of voting share of

financial creditors was mandatory -Whether resolution plan of concerned

corporate debtor(s) had not been approved by requisite percent of voting

shareoffinancialcreditors.

Facts:

Present appeals had arisen from common judgment and order of National

Company Law Appellate T ribunal (NC LAT), rendered in appeals fil ed in

relation to in solven cy resolution process under provisions of I nsolvency and

BankruptcyCode,2016(I&B Code)concerningKamineniSteel&PowerIndia

Pvt. Ltd. (KS & P IP L), having its registered office at Hyderabad, Telangana

and Innoventive Industries Ltd. (II L) having its registered office at Pune,

Maharashtra.NCLATaffirmedorderpassedbyNationalCompanyLawTribunal,

Mumbai Bench (NC LT Mumbai) recording rejection of resolution plan

concerningIILanddirectinginitiation ofliquidationprocessunderC hapterIII

ofP artII ofthe I &BC ode. AsregardsK S& PIPL,NC LATreverseddecision

National C ompany Law Tribunal, Hyderabad (NCLT Hyderabad) which ha

approved its resolution plan and instead remanded proceedings to N CLT

21-02-2024 (Page 1 of 40) www.manupatra.com VNS LEGAL PARTNERS

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Equivalent/Neutral Citation:AIR2019SC1329, II(2019)BC253(SC ), 2019 (2) C C C 332 , [2019]148C LA497(SC ), [2019]213CompCas356(SC ), (2019)2CompLJ1(SC ), 2019(2)C TC321, 2019/INSC/148, 2019(3)SC ALE6, (2019)12SC C 150, 2019 (8) SC J 118, [2019]152SC L312(SC), [2019]3SC R INTHESUPREMECOURTOFINDIA CivilAppealNos.10673,10719, 10971 and 29181 of 2018 DecidedOn:05.02. K.SashidharVs.IndianOverseasBankandOrs. Hon'bleJudges/Coram: A.M.KhanwilkarandAjayRastogi,JJ. Counsels: For Appearing Parties:C.U. Singh, A.M. Singhvi, Colin Gonsalves, Shyam Divan, Sr. Advs.,G.RamakrishnaPrasad,SuyodhanByrapaneni,FilzaMoonis,Mohd.WasayKhan, JohnMathew,KarthikS.D.,BharatJ.Joshi, Advs.,ShikhilSuri,Shiv Kumar Suri,Kamal Deep Dayal, Shilpa Saini, Vinishma Kaul, Saakshi Mago, Ram Lal Roy, Gauri Rasgotra, AnimeshBisht,KaranKhanna, Siddhant Sharma, Advs. for Cyril Amarchand Mangaldas, Kunal Tandon, Pragya Baghel, Niti Jain, Richa, Mahima Singh, Ritesh Kumar, Pranab KumarMullick,SomaMullick,SebatKumarDeuria,PrabhaSwami,DivyaSwami,Soumik Ghosal,V.K.SajithandT.N.DurgaPrasad,Advs. CaseCategory: COMPANYLAW,MRTPANDALLIEDMATTERS CaseNote: Company - Rejection of resolution plan - Initiation of liquidation process - Challenge thereto - Sections 30, 31, 33, 61 of Insolvency and Bankruptcy Code, 2016 (I&BCode)-AppealswasagainstimpugnedorderofNCLATand HighCourtdismissingappealfiledbyAppellantobservingthat,requirementof approval of resolution plan by vote of not less than 75% of voting share of financial creditors was mandatory -Whether resolution plan of concerned corporate debtor(s) had not been approved by requisite percent of voting shareoffinancialcreditors. Facts: Present appeals had arisen from common judgment and order of National Company Law Appellate Tribunal (NCLAT), rendered in appeals filed in relation to insolvency resolution process under provisions of Insolvency and BankruptcyCode, 2016 (I&BCode)concerningKamineniSteel&PowerIndia Pvt. Ltd. (KS & PIPL), having its registered office at Hyderabad, Telangana and Innoventive Industries Ltd. (IIL) having its registered office at Pune, Maharashtra.NCLATaffirmedorderpassedbyNationalCompanyLawTribunal, Mumbai Bench (NCLT Mumbai) recording rejection of resolution plan concerningIILanddirectinginitiationofliquidationprocessunderChapterIII ofPartIIoftheI&BCode.AsregardsKS&PIPL,NCLATreverseddecisiono National Company Law Tribunal, Hyderabad (NCLT Hyderabad) which had approved its resolution plan and instead remanded proceedings to NCLT

19.ThisCourtinitsrecentdecisionshaselaboratelyadvertedtothelegislativehistory anddelineatedthebroadcontoursoftheprovisionsoftheI&BCode.Thelatestbeing the case ofArcelormittal (supra) followed byB.K. Educational (supra) and Innoventive Industries Limited v. ICICI Bank and Anr. MANU/SC/1063/2017 : (2018) 1 SCC 407 Inthepresentcase,however,ourfocusmustbeonthedispensation governingtheprocessofapprovalorrejectionofresolutionplanbytheCoC.TheCoCis calledupontoconsidertheresolutionplanUnderSection30(4)oftheI&BCodeafter it is verified and vetted by the resolution professional as being compliant with all the statutoryrequirementsspecifiedinSection30(2). 2 0 .The CoC is constituted as per Section 21 of the I & B Code, which consists of financialcreditors.Theterm'financialcreditor'hasbeendefinedinSection5(7)oftheI &BCodetomeananypersontowhomafinancialdebtisowedandincludesaperson to whom such debt has been legally assigned or transferred to. Be it noted that the processofinsolvencyresolutionandliquidationconcerningcorporatedebtorshasbeen codifiedinPartIIoftheI&BCode,comprisingofsevenChapters.ChapterIpredicates thatPartIIshallapplyinmattersrelatingtotheinsolvencyandliquidationofcorporate debtorwheretheminimumamountofdefaultisRs.1,00,000/-.Section 5 inChapterI isadictionaryClausespecifictoPartIIoftheCode.ChapterIIdealswiththegamutof procedure to be followed for the corporate insolvency resolution process. For dealing withtheissueonhand,theprovisionscontainedinChapterIIwillbesignificant.From the scheme of the provisions, it is clear that the provisions in Part II of the Code are self-containedcode,providingfortheprocedureforconsiderationoftheresolutionplan bytheCoC. 21.Thestageat whichthedisputeconcerningthe respectivecorporatedebtors(KS& PIPL and IIL) had reached the adjudicating authority (NCLT) is ascribable to Section 30(4)oftheI&BCode,which,attherelevanttimeinOctober2017,readthus: 30(4)-Thecommitteeofcreditorsmayapprovearesolutionplanbyavoteof notlessthanseventyfivepercentofvotingshareofthefinancialcreditors. Ifthe CoChadapprovedtheresolutionplanbyrequisitepercentofvotingshare,then asperSection30(6)oftheI&BCode,itisimperativefortheresolutionprofessionalto submit the same to the adjudicating authority (NCLT). On receipt of such a proposal, theadjudicatingauthority(NCLT)isrequiredtosatisfyitselfthattheresolutionplanas approved by CoC meets the requirements specified in Section 30(2). No more and no less.ThisisexplicitlyspeltoutinSection 31 oftheI&BCode,whichreadthus(asin October2017): 31.Approvalofresolutionplan.-(1)IftheAdjudicatingAuthorityissatisfied thattheresolutionplanasapprovedbythecommitteeofcreditorsUnderSub- section (4) of Section 30 meets the requirements as referred to in Sub- section(2) of Section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors,guarantorsandotherstakeholdersinvolvedintheresolutionplan. (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in Sub-section (1), it may, by an order,rejecttheresolutionplan. (3)AftertheorderofapprovalUnderSub-section(1),- (a) the moratorium order passed by the Adjudicating Authority Under

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