Avantha Holdings Limited & Anr. Vs. Mr. Abhilash Lal & Ors Company

Case Title: Avantha Holdings Limited & Anr. Vs. Mr. Abhilash Lal &            Ors Company

Citation: Appeal (AT) (Insolvency) No. 304 of 2022  

Date: 4 July 2022

 

FACTS:

FL smidth Private Limited requested the start of a CIRP against Jhabua Power Limited (the "Corporate Debtor") in a filing made before NCLT Kolkata (AA) pursuant to Section 9 of the Insolvency and Bankruptcy Code, 2016 (the "IBC"). The Corporate Debtor was the target of a CIRP initiated by the AA in an order dated 27-03-2019, and Mr. Abhilash Lal (also known as "Respondent No. 1") was chosen as the Resolution Professional.

The promoter and shareholder of Avanta Power and Infrastructure Limited, which in turn owns 17.9% of the shares of Corporate Debtor, is Avantha Holdings Limited ("Appellant"). The Resolution Professional received a One Time Settlement (OTS) proposal from the Appellant on June 3, 2019, and CoC determined it to be commercially viable. The Resolution Professional will then request expressions of interest ("EOI") from potential resolution applicants before the Resolution Plan is submitted.

On 22.10.2019 NTPC Ltd. (Respondent No. 3) submitted an affidavit certifying its eligibility under section 29A of IBC and Informed Resolution Professional on 06.12.2019 that Ratnagiri Gas and Power Private Limited, which were joint ventures of NTPC, have been declared NPA. the Canara Bank classified RGPPL as NPA om 21.05.2018, with effect from 01.04.2009. similarly, Canara bank has Classified KLL as NPA with effect from 01.04.2009. NTPC submitted its Resolution plan on 30.12.2019 and revised the same on subsequent three occasions and had stated on affidavit that No dues Certificates in respect of KLL have been received and with regard to RGPPL, there was no overdue amount.

On 21.12.2022. the appellant made a proposal to the CoC under section 12A of IBC for the settlement of a debt owed by the Corporate Debtor. In a meeting dated 05.03.2021 the CoC rejected the Appellants Proposal as not being economically viable.

On 16.04.2021, the NTPC submitted its revised Resolution Plan and an affidavit under section 29A, claiming that the dues towards the lenders of KLL and RGPPL have been satisfied and lenders have provided due certificates as on 30.03.2022 and January 2021 respectively.

On 06.06.2021, the appellant filed an application bearing I. A No 537 of 2021 before the AA seeking a declaration that NTPC is not compliant with Section 29A of IBC and further praying to set aside the Coc decisions rejecting the proposal under Section 12A.

Thereafter, NTPC yet again submitted a revised Resolution Plan 14.06.2021, which was approved by the CoC with 100% votes. Subsequently, I. A No 586 of 2021 was filed by the Resolution Professional before the AA for approval of the Resolution Plam. The AAA vide an order dated 08.03.2021 rejected the I.A No. 537 of 2021 was filed by the Appellant and held that the NTPC is not disqualified under Section 29A of the IBC.

The Appellant filed an appeal before the NCLAT challenging the Order 08.03.2021 seeking disqualification of NTPC under Section 29A of IBC and praying to set -aside the decision of CoC rejecting the proposal of the appellant under Section 12A of IBC.

 

ISSUE FOR CONSIDERATION:

1.    The promoters cannot submit a Resolution plan indirectly by way of a Proposal under section 12A.

2.   The one-year period in Section 29A(c) of IBC and ineligibility of Resolution Applicant.

RATIO & DECISION TAKEN BY TRIBUNAL:

NCLAT observes that “Section 12A proposal cannot be forced upon the lenders. The Promoters, who led to the insolvency process of Corporate Debtor cannot claim to submit a Resolution Plan indirectly by way of proposal under Section 12A and ask the lenders to evaluate their Resolution Plan. Something which is not permissible directly by virtue of prohibition under Section 29A for submitting Resolution Plan by the Promoters, cannot be permitted to be done indirectly.”

The NCLAT after referring Swiss Ribbons Private Limited and another vs. Union of India and Others – (2019) 4 SCC 17 observed that “The statutory provision under Section 29A, sub-clause (c) is plain and clear that grace period of one year has been given and if after expiry of grace period, Resolution Applicant is unable to pay the dues and the NPA continues, the Resolution Applicant becomes ineligible.”

there is no error in the rejection of the proposal submitted by the Appellant claimed to be under Section 12A by the CoC, after due consideration and the Adjudicating Authority has rightly refused to interfere with the commercial decision of the CoC. 

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