2018 (11) TMI 1849 - AT - Insolvency and Bankruptcy

NCLAT emphasizes fair evaluation process and director participation in CoC meetings

Maharashtra Seamless Ltd. Versus K.K. Lakshminarayana & Ors.

The National Company Law Appellate Tribunal (NCLAT) ruled in favor of 'Maharashtra Seamless Ltd.' in a case challenging the re-determination of the ... NCLT sought to re-determine the Liquidation Value before considering the Resolution Plan - HELD THAT:- It is clear that once the Committee of Creditors has approved the plan and the Resolution Professional produced the same before the Company Appeal in the case of QUINN LOGISTICS INDIA PVT. LTD. VERSUS MACK SOFT TECH PVT. LTD., MOHD. SABIR PARVEZ AND MR. M.L. JAIN, (RESOLUTION PROFESSIONAL) [2018 (6) TMI 904 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], where it was held that the Adjudicating Authority has to approve the same if it is in consonance with Section 30(2) or to reject it if it is in violation of Section 30(2). Prima facie there is no provision to direct the Resolution Professional at that stage to redetermine the liquidation value once the plan has been approved by the Committee of Creditors. Let notice be issued - Post the case 'for admission (after notice)' on 12th November, 2018 on top of the list. Issues:1. Redetermination of liquidation value before considering the Resolution Plan.2. Exclusion of certain periods in the Corporate Insolvency Resolution Process.3. Authority of the Adjudicating Authority in approving or rejecting resolution plans.4. Compliance with Section 31 of the Insolvency and Bankruptcy Code, 2016.Analysis:1. The appeal involved a challenge by 'Maharashtra Seamless Ltd.' against an order directing the re-determination of the Liquidation Value before considering their Resolution Plan. The National Company Law Appellate Tribunal (NCLAT) highlighted circumstances justifying the exclusion of certain periods in the Corporate Insolvency Resolution Process, emphasizing the need for a fair evaluation process. The Tribunal emphasized the importance of allowing Directors of the Suspended Board to participate in CoC meetings, ensuring transparency in decision-making.2. The Tribunal referred to specific circumstances warranting exclusion of periods in CIRP, such as legal stays, absence of a Resolution Professional, and delays in the resolution process due to court orders. The judgment underscored the discretion of the Adjudicating Authority to exclude certain periods if circumstances justify such actions, ensuring a balanced and equitable resolution process.3. The judgment delved into the authority of the Adjudicating Authority in approving or rejecting resolution plans under Section 31 of the Insolvency and Bankruptcy Code, 2016. It clarified that once the Committee of Creditors approves a plan meeting the statutory requirements, the Adjudicating Authority must either approve or reject the plan based on its compliance with the Code. The Tribunal highlighted that there is no provision to direct the Resolution Professional to redetermine the liquidation value after plan approval by the CoC.4. The Tribunal directed the Adjudicating Authority to proceed with the approval process under Section 31 of the I&B Code without unnecessary delays, ensuring fair and unbiased decision-making. The judgment emphasized the importance of adhering to statutory provisions and conducting the resolution process efficiently, without undue influence from previous orders. The appeal was disposed of with directions for the Adjudicating Authority to proceed in accordance with the law, maintaining the integrity of the resolution process.