2023 (6) TMI 1007 - AT - Insolvency and Bankruptcy

Appellate Tribunal clarifies RBI approval requirement for Resolution Plans under Insolvency Code

The Appellate Tribunal addressed the rejection of a Resolution Plan under the Insolvency and Bankruptcy Code, 2016, due to the requirement of prior ... Rejection of Resolution Plan - Section 31(1) of the ‘Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Having observed that the Resolution Plan preferred by one of the Resolution Applicants, required prior approval of RBI, the Adjudicating Authority, while rejecting the Resolution Plan passed an order for Liquidation. The Appellant herein is the Interim Resolution Professional (IRP) whose main grievance is that while ordering Liquidation of the Corporate Debtor, the Adjudicating Authority had appointed the 2nd Respondent herein as the Liquidator contrary to the Statutory Provisions, by disqualifying the Appellant under Section 34 (4)(a) of the Code. In Company Appeal (AT) (CH) (Ins) No. 181 of 2022 [2023 (6) TMI 505 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI] has set aside the rejection of the Resolution Plan by the Adjudicating Authority holding that this ‘Tribunal’ is of the considered view that the Adjudicating Authority ought not to have rejected the Resolution Plan, more so, when the principal objective of the Code is that ‘revival of the Corporate Debtor and Resolution’. Liquidation ought to be the last resort, keeping in view the scope and spirit of the Code. As Liquidation itself is set aside, this Company Appeal is rendered infructuous and for all the aforementioned reasons, the present Company Appeal is dismissed as an infructuous one - apepal dismissed. Issues Involved:The issues involved in the judgment are the rejection of a Resolution Plan under the Insolvency and Bankruptcy Code, 2016, due to the requirement of prior approval from the Reserve Bank of India (RBI) and the appointment of a Liquidator contrary to statutory provisions.Issue 1: Rejection of Resolution PlanThe Appellate Tribunal observed that the Resolution Plan submitted by a Resolution Applicant required prior approval from the RBI under the SARFAESI Act. The Tribunal held that the Resolution Plan was in contravention of Section 30(2)(e) of the Insolvency and Bankruptcy Code, 2016. It was noted that even though the entry point under Section 29A was satisfied, the Successful Resolution Applicant must be capable of submitting the plan without the prior permission of the RBI. The Tribunal referenced a previous case to support the requirement of RBI approval for Resolution Plans involving Asset Reconstruction Companies (ARCs).Issue 2: Appointment of LiquidatorThe Interim Resolution Professional (IRP) raised a grievance regarding the appointment of a Liquidator by the Adjudicating Authority while ordering Liquidation of the Corporate Debtor. The IRP contended that the appointment of the Liquidator was contrary to statutory provisions, specifically disqualifying the IRP under Section 34(4)(a) of the Code.Judgment Summary:In a physical mode judgment, the Appellate Tribunal addressed the rejection of a Resolution Plan under the Insolvency and Bankruptcy Code, 2016, due to the requirement of prior approval from the RBI. The Tribunal emphasized the need for Resolution Plans to comply with the provisions of the Code, including the necessity of RBI approval for certain Resolution Applicants. Additionally, the Tribunal highlighted the importance of the Commercial Committee's approval of Resolution Plans and the objective of the Code to facilitate the revival of Corporate Debtors. The Tribunal concluded that the rejection of the Resolution Plan was not justified, considering the overarching goal of corporate revival. As a result, the Company Appeal related to Liquidation was deemed infructuous and dismissed, with no costs awarded.