National Company Law Appellate Tribunal Says Third-Party Cannot Challenge Resolution Plan

National Company Law Appellate Tribunal Says Third-Party Cannot Challenge Resolution Plan

The Appellate Tribunal termed appeal by third-party seeking protection of its investment as premature

The National Company Law Appellate Tribunal (NCLAT) dismissed an appeal as being premature, filed against the order passed by the National Company Law Tribunal (NCLT) at the Mumbai Bench, which approved the Resolution Plan for the Corporate Debtor.

The matter titled Prudential International Insurance Holdings Ltd v The Administrator, Dewan Housing Finance Corporation Ltd And Ors was heard by the Principal Bench of the National Company Law Appellate Tribunal at New Delhi, comprising of Justice A.I.S. Cheema and Dr Alok Srivastava.

The factual background of this case is that the NCLT approved the Resolution Plan submitted by the Respondent – Successful Resolution Applicant for the Corporate Debtor. The Appellant was admittedly a third party unconnected with the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor and was neither a Financial Creditor nor an Operational Creditor of the Corporate Debtor.

The Appellant claimed that it had certain pre-existing and continuing contractual arrangements with the Corporate Debtor and was 49 per cent shareholder of the Joint Venture Company – Pramerica Life Insurance Limited, in which the Corporate Debtor was a shareholder till 31 March 2017.

It was contended by the Appellant that the Corporate Debtor continues to be bound by the obligations of its shareholding under the Shareholder's Agreement dated 25 July 2013 as well as per the Articles of the Joint Venture Company. The Appellant further contended that certain reliefs and waivers under the Resolution Plan would impact the rights of the Appellant and the same was argued by the Appellant before the NCLT through an application which is pending but yet the Resolution Plan was approved by NCLT before deciding the Appellant's application.

The Respondent contended that the plan, which was approved was not conditional and could not be interfered with at the instance of a third party like the Appellant. It was further submitted by the Respondent that once the Resolution Plan was approved, such applications would be deemed to be rejected.

The bench noted that the parties had raised issues with regard to the rights claimed by the Appellant and whether or not the Appellant had a right to question the Resolution Plan. It chose not to comment on the same since the application filed by the Appellant before the NCLT was still pending.

However, it made the following observation:

"Without rights claimed by Appellant being adjudicated before Adjudicating Authority, Appellant cannot maintain the challenge to the approval of Resolution Plan by way of Appeal."

Therefore, the appeal was dismissed as being premature.