NCLT Approves Propel Plastic Products- Plastauto Bid for Sintex- BAPL

NCLT Approves Propel Plastic Products- Plastauto Bid for Sintex- BAPL

The National Company Law Tribunal (NCLT), Ahmedabad Bench, has approved Welspun Corp’s resolution plan for Sintex-BAPL, which has been undergoing insolvency proceedings for over two years.

The Ahmedabad bench of NCLT, comprising of Dr. Madan B. Gosavi (Judicial Member) and Kaushalendra Kumar Singh (Technical Member), pronounced the order, approving the resolution plan of Sintex-BAPL Limited, Sintex Plastics Technology Ltd (SPTL).

In the present case, M/s. Sintex-BAPL Limited – the Corporate Debtor has been admitted in CIRP vide order dated 18.12.2020. The CIRP of the Corporate Debtor remains stayed by various orders passed by this Adjudicating Authority and also by Hon'ble National Company Law Appellate Tribunal.

It was seen from the record that the RP received resolution plans from two Resolution Applicants i.e., (i) JM Financial Asset Reconstruction Company Limited (for short “JMFARC”) and (ii) Propel Consortium consisting of Propel Plastic Products Private Limited and Plastauto Private Limited. He examined those plans and submitted both plans for consideration of Committee of Creditors (CoC) with his comments.

The 14th CoC meeting was held on 28 January, 2023. The CoC by 74.26% votes approved the resolution plan of Propel Consortium. The same plan has been submitted for our approval as per section 30(6) of the IBC, 2016.

The bench after considering the submissions found that the resolution plan was not in contravention of any provisions of the law for the time being in force. Hence, the bench held that provisions of Section 30(2)(e) of the IBC, 2016 were complied with.

The bench noted that Section 30(2)(f) of the IBC, 2016 mandates that the resolution plan must comply with the other requirements specified by the Board i.e., Insolvency and Bankruptcy Board of India. Those requirements appear in Regulations 38 and 39 of IBBI (CIRP of the Corporate Persons) Regulations, 2016. There are three major requirements relating to the contents of the resolution plan i.e.:

(i) the resolution plan must give equal treatment to all stakeholders;

(ii) the resolution plan must set fixed term for its implementation, and

(iii) the resolution applicant must have the capacity to submit and implement the resolution plan.

On perusal of the financial outlay, the NCLT found that all stakeholders were treated equally. In the resolution plan, it was mentioned that the entire payment would be made to the creditors and other stakeholders within 30 to 90 days from the date of approval of the resolution plan by this Adjudicating Authority.

This resolution plan was submitted by Propel Consortium consisting of the group companies of Welpun Group. The Welspun Group’s net worth is about 2.3 billion USD.

Further, the bench was of the view that Section 79 of the Income Tax Act, shall not be applicable if a company was a widely held company (i.e., a company in which public are substantially interested).

The bench observed, “as such, section 79 shall not be applicable when a widely held company, after take over, acquires a status of closely held company; but the section would be applicable even if a closely held company, after take over/ change in shareholding acquires the status of widely held company.”

In the present case, the Corporate Debtor under CIRP was a subsidiary of a listed company. Therefore, the status of the Corporate Debtor before take over (on approval of the resolution plan under IBC, 2016) is of widely held company i.e. a company in which public are substantially interest.

In this regard the NCLT observed, “we have also noted that after the take over its status would be of a closely held company. But as discussed herein above, for the purpose of applicability of section 79, the status of the company at the time of change in shareholding (i.e., prior to take over) is only relevant. In that view of the matter, we hold that section 79 of the Income Tax Act is not at all applicable on the Corporate Debtor even after its takeover on approval of the resolution plan under IBC, 2016. Accordingly, it shall be automatically entitled to carry forward its losses for set-off against income in subsequent years in accordance with the provisions of Income Tax Act and to that extent relief sought is allowed.”

Furthermore, the bench held that the Resolution Applicant cannot be saddled with any previous claim against the Corporate Debtor prior to initiation of its CIRP. For the permits, licenses, leases, or any other statutory right vested in the Corporate Debtor shall remain with the Corporate Debtor and for the continuation of such statutory rights, the resolution applicant has to approach the concerned statutory authorities under relevant laws.

Next, the bench noted that the resolution plan also includes a proposal for reverse merger of the company Propel Plastic Products Private Limited (which is resolution applicant-1 of the consortium) with the Corporate Debtor pursuant to the approval of the resolution plan.

The NCLT ruled, “accordingly, we allow the merger which will be effective from the date of this order subject to the condition that as per the said resolution dated 21 December, 2022, the company Propel Plastic Products Private Limited shall seek the formal approval separately as per the Companies Act, 2013.”