2021 (5) TMI 317 - Tri - Insolvency and Bankruptcy

Unsuccessful Resolution Applicant Impleaded for Challenge in Resolution Plan Approval Process: Key Legal Implications

The Adjudicating Authority allowed the unsuccessful Resolution Applicant to be impleaded in IA No. 537/2020, considering them a necessary and proper party ... Impleadment of parties under Section 60(5) of the Insolvency & Bankruptcy Code, 2016 - necessary and proper party - approval of resolution plan - locus to challenge Committee of Creditors' decision before the Adjudicating Authority or Appellate Tribunal - liberal approach to impleadment - role of an Asset Reconstruction Company as a resolution applicantImpleadment of parties under Section 60(5) of the Insolvency & Bankruptcy Code, 2016 - necessary and proper party - approval of resolution plan - locus to challenge Committee of Creditors' decision before the Adjudicating Authority or Appellate Tribunal - liberal approach to impleadment - The unsuccessful resolution applicant (Applicant in IA No.189/2021) may be impleaded as a proper and necessary party in IA No.537/2020. - HELD THAT: - The Bench held that there is no bar to impleading the unsuccessful resolution applicant into IA No.537/2020 because such applicant would be affected by the Adjudicating Authority's order and its presence would enable the Bench to enlighten itself on merits. The Adjudicating Authority construed the Hon'ble Appellate Tribunal's observations as permitting dissatisfied parties to move the NCLT at the time of approval or rejection of a resolution plan to challenge the manner in which the CoC approved the plan. In view of that interpretation and in line with the Supreme Court's direction to adopt a liberal approach, the unsuccessful resolution applicant was found to have locus to be heard and to raise issues regarding the CoC's approval and any addendum to the plan. Consequently, impleadment was allowed to ensure that relevant objections and materials (including CoC minutes) may be brought on record for consideration when IA No.537/2020 is taken up. [Paras 4, 5, 7]IA No.189/2021 is allowed and the Applicant is impleaded as a proper and necessary party in IA No.537/2020.Role of an Asset Reconstruction Company as a resolution applicant - approval of resolution plan - Whether an Asset Reconstruction Company can act as a resolution applicant was not finally decided and remains open for determination upon impleadment. - HELD THAT: - The Bench recorded a doubt on the legal question of whether an Asset Reconstruction Company can be a resolution applicant. That question was not adjudicated on merits in this order; the Bench indicated that the point of law can be addressed and clarified once the unsuccessful resolution applicant or any other person is impleaded and relevant issues and records (including CoC minutes) are placed before the Adjudicating Authority during consideration of the resolution plan. [Paras 6]The legal question as to whether an Asset Reconstruction Company can be a resolution applicant is left open for consideration when the impleaded parties and relevant materials are before the Adjudicating Authority.Final Conclusion: The application for impleadment (IA No.189/2021) is allowed and the Applicant is impleaded as a proper and necessary party in IA No.537/2020; IA No.537/2020 is listed on 05.05.2021. A separate question whether an Asset Reconstruction Company can be a resolution applicant is left open for determination when the matter is taken up with the impleaded parties and records. Issues:Impleadment of unsuccessful Resolution Applicant in IA No. 537/2020 for approval of Resolution Plan.Analysis:The unsuccessful Resolution Applicant filed an application under Section 60(5) of the Insolvency & Bankruptcy Code, 2016 to be impleaded into IA No. 537/2020, claiming to be a necessary and proper party for the approval of the Resolution Plan submitted in IA No. 281/2019. The Applicant alleged that their claim was arbitrarily rejected by the Committee of Creditors (CoC), and the Successful Resolution Applicant made changes to the plan with violations, making it essential for the unsuccessful Resolution Applicant to be heard.The Respondent, Successful Resolution Applicant, contended that the Applicant was not a necessary party as their claim had been rejected previously, and the Appellate Tribunal had clarified that the unsuccessful Resolution Applicant could challenge the plan only after its approval. However, the Adjudicating Authority interpreted the Appellate Tribunal's order differently, allowing dissatisfied parties to move the National Company Law Tribunal (NCLT) before the approval or rejection of the plan, leading to the possibility of impleading the unsuccessful Resolution Applicant.The Adjudicating Authority emphasized that there was no bar for the unsuccessful Resolution Applicant to be impleaded in IA No. 537/2020, as they would be affected by the Authority's orders and could shed light on issues related to the CoC's approval of the resolution plan. Referring to Supreme Court judgments advocating a liberal approach, the Authority deemed the unsuccessful Resolution Applicant a necessary and proper party for the resolution of the dispute.Moreover, the Authority expressed doubt regarding whether an Asset Reconstruction Company could be a Resolution Applicant, a legal point that could be clarified by the unsuccessful Resolution Applicant once impleaded. The impleadment of the Applicant was deemed crucial for addressing various issues surrounding the approval of the resolution plan and the CoC's decisions, ensuring a comprehensive adjudication of the matter.Therefore, the Adjudicating Authority allowed the impleadment of the Applicant as a proper and necessary party in IA No. 537/2020, enabling their participation in the proceedings for a thorough examination of the issues at hand.