Resolution Plan Rejection Upheld, Liquidation Ordered for Insufficient Voting Shares

The National Company Law Appellate Tribunal (NCLAT) upheld the rejection of a Resolution Plan for a company due to insufficient voting shares but set aside the approval of another company's Resolution Plan that did not meet the required voting threshold. Consequently, the NCLAT directed the initiation of liquidation proceedings for the latter company under the Insolvency and Bankruptcy Code, 2016.

---

---

Issues Involved:
1. Approval of the Resolution Plan under the Insolvency and Bankruptcy Code, 2016.
2. Voting requirements for the Committee of Creditors.
3. The role of the Adjudicating Authority in approving the Resolution Plan.
4. Liquidation proceedings under Section 33 and Section 34 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Approval of the Resolution Plan under the Insolvency and Bankruptcy Code, 2016:
The case involves the approval of a Resolution Plan submitted by the Corporate Debtor, Kamineni Steel & Power India Pvt. Ltd., under Section 10 of the Insolvency and Bankruptcy Code, 2016 (I&B Code). The Resolution Plan was discussed in multiple meetings of the Committee of Creditors (CoC), with various suggestions and modifications proposed. However, the final Resolution Plan was approved by only 55.73% of the voting power, which is below the required threshold of 75%.

2. Voting requirements for the Committee of Creditors:
Section 21(8) of the I&B Code mandates that all decisions of the Committee of Creditors must be taken by a vote of not less than seventy-five percent of voting shares of the Financial Creditors. In this case, the Resolution Plan for Kamineni Steel & Power India Pvt. Ltd. did not meet this requirement, as it was approved by only 55.73% of the voting power. The subsequent amendments to the I&B Code reduced the required voting threshold, but these amendments were not applicable at the time of the decision.

3. The role of the Adjudicating Authority in approving the Resolution Plan:
The Adjudicating Authority, National Company Law Tribunal (NCLT), Hyderabad Bench, initially approved the Resolution Plan despite it not meeting the 75% voting requirement. This decision was challenged, and the National Company Law Appellate Tribunal (NCLAT) held that the approval of the Resolution Plan by less than seventy-five percent of the voting shares contravenes Section 30(2)(e) of the I&B Code, which stipulates that the Resolution Plan should not contravene any provisions of the law in force.

4. Liquidation proceedings under Section 33 and Section 34 of the Insolvency and Bankruptcy Code, 2016:
Given the failure to approve the Resolution Plan with the requisite voting share, the NCLAT directed the initiation of liquidation proceedings for Kamineni Steel & Power India Pvt. Ltd. under Section 33 read with Section 34 of the I&B Code. The case was remitted to the Adjudicating Authority to pass the necessary liquidation order immediately.

Conclusion:
The NCLAT upheld the decision of the Adjudicating Authority, Mumbai Bench, which rejected a Resolution Plan for Innoventive Industries Limited due to insufficient voting shares. Conversely, it set aside the Hyderabad Bench's order approving the Resolution Plan for Kamineni Steel & Power India Pvt. Ltd. with less than the required voting threshold. Consequently, the NCLAT directed the initiation of liquidation proceedings for Kamineni Steel & Power India Pvt. Ltd. under the relevant sections of the I&B Code, with no order as to costs.

---