NCLAT Approves Resolution Plan for Shell Companies

Fact

SEBI had filed an appeal in NCLAT against the approval of resolution plan in Assam Company Limited by NCLT. It contested that the order of the Adjudicating authority for approval of Resolution Plan contravenes the provision as provided under Section 30(2) (e)

(e) does not contravene any of the provisions of the law for the time being in force;”

In turn,the Successful Resolution Applicant had objected the appeal on the grounds that under Sub-section (3) of Section 61 r/w Section 32 of the I&B Code the appeal is not maintainable and it also submitted that rights of public shareholders have been protected.

NCLAT not only upheld that the resolution plan in ‘Assam Company India Limited’ (Corporate Debtor) by ‘BRS Ventures Investment Ltd.’ (Successful Resolution Applicant) to be appropriate under Section 30(2)(e) of IBC but also observed that the entire process of CIRP as well as functioning of RP to be within the framework of the Code.

Reason for Rejection

The NCLAT observed that the Appellant has not disputed that the investigation started against the Corporate Debtor was challenged by the Corporate Debtor before Hon’ble High Court of Guwahati in Writ Petition (C) No. 2572/2018. In said case, by order Company Appeal (AT) (Insolvency) No. 629 of 2018 dated 7th March, 2019, the Hon’ble High Court of Guwahati has set aside the investigation, copy of which has been enclosed.

It also held that “the interim order passed by SEBI (Appellant) does not amount to any existing law, to attract Clause (e) of Section 30(2) of the I&B Code, therefore, the Appellant cannot take plea that the approved Resolution Plan is in contravention”.

Conclusion

The Court relying upon Section 30(2) read with Section 61 held as under:

NCLAT held that the Appellant has also failed to make out a case under Section 61(3)(ii) to suggest that there has been any material irregularity in exercising the powers by the resolution professional during the corporate insolvency resolution period.The ground shown in Section 61(3)(iii), (iv) and (v) are also not attracted and not the ground taken by the Appellant to allege that debt owed to Operational Creditors have not been provided, or Insolvency Resolution Process costs have not been provided for repayment or the Resolution Plan does not comply with any other criteria specified by the Board.

The appeal of SEBI was dismissed but at the same it was held that the order passed by the NCLT Guwahati or NCLAT will not come in the way of SEBI or any competent authority to take steps against erstwhile Promoters, Directors or Officers of ACIL,if there is a violation of any of the provisions under SEBI Act.