NCLT dismisses Hindustan Coils Ltd appeal

NCLT dismisses Hindustan Coils Ltd appeal

NCLT rules that if a Resolution Plan is considered beyond the time limit then it will make a never-ending process

The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal filed against Hindustan Coils Ltd. and others on 11 January and directed the Adjudicating Authority (National Company Law Tribunal) Special Bench, New Delhi, to proceed with the application filed by the RP for approval of Resolution Plan as per law.

The Appellant, Kalinga Allied Industries India Pvt. Ltd., had filed this appeal against the impugned order passed by the Adjudicating Authority whereby the Interlocutory Application filed by M/s Hindustan Coils Ltd. (respondent No. 1) was allowed and it was directed that the application along with the proposed plan of respondent No. 1 be placed before the committee of creditors (COC) for consideration.

The Appellant mainly submitted that the Adjudicating Authority cannot suo motu direct the COC to consider a new resolution plan and reconsider already approved resolution plan.

Once the Resolution Plan has been opened and the fundamentals and financials of the plan and offer made therein were disclosed to all the participants, including RP, no further fresh bid or offer could have been accepted or considered.

Per Contra, the Respondent submitted that the Appellant had made misrepresentation in the appeal and tried to misguide this Appellate Tribunal. It was further submitted that the impugned order granted an opportunity for COC to evaluate better Resolution Plan. The Appellant had itself delayed the CIRP of the Corporate Debtor. The Appellant dragged the CIRP by two years by abusing its position as the only Resolution Applicant.

The Appellate Tribunal mainly opined that the Adjudicating Authority has very limited power to judicial scrutiny and the statutory provision does not permit the Adjudicating Authority to interfere with the commercial wisdom of the COC. Even for maximization of value of assets of the Corporate Debtor. The Adjudicating Authority is not entitled to overturn a business decision of the COC.

The NCLAT observed that in the impugned order the Adjudicating Authority erroneously assumed that it is the duty of the Adjudicating Authority to satisfy itself that the price offer is reasonable and adequate. For this purpose, the Adjudicating Authority considered the liquidation value and fair value of the Corporate Debtor and price offered by successful Resolution Applicant and reached a conclusion that the Respondent No. 1's offer is around 12 per cent more than the offer of successful Resolution Applicant.

The Appellate Tribunal was of the view that the Adjudicating Authority had exceeded its jurisdiction and indulged in a quantitative analysis which was not permissible under Section 31 of the I&B Code.

It was also noted that the Ld. Adjudicating Authority had erroneously entertained the Application and Resolution Plan of the Respondent No. 1 and directed the RP to put up the same before the COC for consideration.

The Appellate Tribunal noted that when the Application for approval of Resolution Plan is pending before the Adjudicating Authority, at that time the Adjudicating Authority cannot entertain an Application of a person who has not participated in CIRP even when such person is ready to pay more amount in comparison to the successful Resolution Applicant.

If a Resolution Plan is considered beyond the time limit then it will make a never-ending process. Thus, impugned order was held to be not sustainable in law as well as in fact and was set aside.