2019 (9) TMI 1304 - Tri - Companies Law

NCLT approves JSW Steel's resolution plan under Insolvency Code, dismisses Ex-Management request

Punjab National Bank Versus Bhushan Power & Steel Ltd.

The National Company Law Tribunal (NCLT) approved the resolution plan submitted by JSW Steel Limited, subject to compliance with the amended Section 30(2) ... Approval of Resolution Plan - CIRP process - substantial compliance - HELD THAT:- The acceptance and approval of the resolution plan shall be subject to the following; (a) The amount due to the operational creditors under the resolution plan must be paid in accordance with the amended Section 30 (2) of the Code (b) C.A. No. 327(PB)/2019 with a prayer for placing the settlement proposal dated 20.02.2019 before the CoC is hereby rejected. (c) CA No. 286(PB)/2019 filed by the erstwhile directors Mr. Sanjay Singhal and Mrs. Aarti Singhal seeking copies of the resolution plan is dismissed with a cost of ₹ 1/- lac to be paid personally by Mr. Sanjay Singal and Ms. Aarti Singal in equal share. (d) The resolution plan would be binding on the corporate debtor, its creditors, guarantors, members, employees and other stakeholders. The reduction of share capital of the corporate debtor as contemplated by the resolution plan would take effect without any further deed or act on the part of the corporate debtor and/or its constitutes. (e) We also approve the appointment of Monitoring Agency from the date of this order until the closing date. Accordingly, the CoC and the RP would continue as Monitoring Agency. (f) The power of the Board of Directors of the Corporate Debtor shall remain suspended until the closing date. (g) Various reliefs sought from the statutory authorities under the Income-tax Act, 1961, Ministry of Corporate Affairs, Department of Registration and Stamps, Reserve Bank of India and others are also disposed of. We do not feel persuaded to accept the prayer made in the resolution plan yet the resolution plan applicant may file appropriate applications before the competent authorities which would be considered in accordance with law because it would not be competent for the Adjudicating Authority-NCLT to enter into any such area for granting relaxation, concession or waiver which is wholly within the domain of competent authorities. (h) It is needless to clarify that Section 30(2) (f) of the Code mandates that the Resolution plan should not be against any provisions of the existing law. The resolution applicant, therefore, shall adhere to all the applicable laws for the time being in force. (i) The criminal proceedings initiated against the erstwhile Members of the Board of Directors and others shall not effect the JSW-H1 Resolution Plan Applicant or the implementation of the resolution plan by the Monitoring Agency comprising of CoC and RP. We leave it open to the Members of the CoC to file appropriate applications if criminal proceedings result in recovery of money which has been siphoned of or on account of tainted transactions or fabrication as contemplated under the various provisions of the Code or any other law. Those applications shall be considered in accordance with the prevalent law. (j) The RP is directed to redistribute the profits earned by running the Corporate Debtor during the Corporate Insolvency Resolution Process in accordance with the judgment of the Hon'ble NCLAT rendered in the case of Standard Chartered Bank (supra) and the action to be taken by the RP is evident from the reading of para 211 of the said judgment. (k) The cases in which the Adjudicating Authority or the Appellate Authority could not decide the claim on merit, all such Applicants may raise the issue before an appropriate forum in terms of Section 60(6) of the Code. The other 'Financial Creditors/Operational Creditors' would not be entitled any remedy under Section 60 (6) of the Code. Issues Involved:1. Approval of the Resolution Plan submitted by JSW Steel Limited.2. Supply of copies of the resolution plan to the Ex-Management of the Corporate Debtor.3. Claims by Operational Creditors.4. Settlement proposal by Mr. Sanjay Singal under Section 12A of the Insolvency and Bankruptcy Code, 2016.Issue-Wise Detailed Analysis:1. Approval of the Resolution Plan submitted by JSW Steel Limited:The National Company Law Tribunal (NCLT) considered the resolution plan submitted by JSW Steel Limited under Sections 30(6) & 31(1) of the Insolvency and Bankruptcy Code, 2016. The plan was approved by the Committee of Creditors (CoC) and included various concessions. The plan was evaluated extensively in CoC meetings, and JSW Steel emerged as the highest evaluated plan. The plan proposed significant upfront equity for improving the operations of the Corporate Debtor and provided for the payment of insolvency resolution process costs, repayment of operational creditors, and management of the Corporate Debtor’s affairs post-approval. The NCLT approved the plan subject to compliance with the amended Section 30(2) of the Code, ensuring fair treatment of operational creditors, and adherence to applicable laws.2. Supply of copies of the resolution plan to the Ex-Management of the Corporate Debtor:The Ex-Management argued for the supply of the resolution plan based on the Supreme Court’s judgment in Vijay Kumar Jain v. Standard Chartered Bank. The NCLT noted that the Ex-Management had been given adequate opportunities to inspect the resolution plans and had acknowledged their satisfaction. The tribunal held that substantial compliance with the requirement of providing access to the resolution plan had been made, and no prejudice was caused to the Ex-Management. The tribunal dismissed the application for supplying copies of the resolution plan with costs imposed on the Ex-Management.3. Claims by Operational Creditors:The tribunal examined the treatment of operational creditors under the resolution plan, ensuring no discrimination between financial and operational creditors. The plan provided for the payment of 50% of the admitted claims of operational creditors, subject to a maximum cap, and 10% for contingent creditors. The tribunal found that the classification of contingent creditors was justified and complied with the law. The plan ensured that operational creditors were treated fairly, and their claims were addressed in accordance with the amended Section 30(2) of the Code.4. Settlement proposal by Mr. Sanjay Singal under Section 12A of the Insolvency and Bankruptcy Code, 2016:Mr. Sanjay Singal filed a settlement proposal under Section 12A, which requires approval from 90% of the CoC’s voting share. The proposal was rejected by major financial creditors, including Punjab National Bank and State Bank of India. The tribunal held that the settlement proposal did not meet the requirements of Section 12A and Regulation 30A of the CIRP Regulations, 2016. The application for placing the settlement proposal before the CoC was dismissed.Conclusion:The NCLT approved the resolution plan submitted by JSW Steel Limited, subject to compliance with the amended Section 30(2) of the Code and other applicable laws. The tribunal dismissed the applications for supplying copies of the resolution plan to the Ex-Management and the settlement proposal under Section 12A. The resolution plan was found to be fair and compliant with the legal requirements, ensuring the revival and continuation of the Corporate Debtor.