Summary
The Supreme Court restored approval of Maharashtra Seamless’s resolution plan, holding that a resolution bid need not match the corporate debtor’s liquidation value. The NCLAT could not replace the creditors’ commercial assessment with an equitable demand for a higher upfront payment when statutory requirements were met. The applicant’s withdrawal application was dismissed on the circumstances of this appeal; the broader question of forfeiture of a successful applicant’s withdrawal rights was left undecided. Payment offered to operational creditors and handover of assets were directed.
Issues
- Whether an approved resolution plan had to match liquidation value and whether the successful applicant could withdraw through its application in this appeal.
Provisions considered
- Sections 30 and 31, Insolvency and Bankruptcy Code, 2016Approval entails statutory compliance and provision for implementation, with limited judicial review of the creditors’ commercial decision; no requirement to match liquidation value was shown. (¶¶ 18, 23, 26, 27, 28)
- Section 12A, Insolvency and Bankruptcy Code, 2016The withdrawal procedure concerns applications under Sections 7, 9 or 10 and is not an exit route for a resolution applicant. (¶¶ 15, 29)
- Regulation 35, IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016Liquidation valuation assists the committee’s assessment; it does not impose a matching minimum resolution bid. (¶¶ 24, 26, 27)
Held
- No provision required a resolution bid to equal the assessed liquidation value. Valuation assists the committee of creditors; where statutory requirements are satisfied, a perceived disparity between asset value and upfront payment does not warrant replacing its commercial wisdom. (¶¶ 26, 27, 28)
- Following Essar Steel, statutory protection of operational creditors does not require identical recovery percentages across different creditor classes. Here the applicant had voluntarily offered the same percentage and no operational creditor challenged the plan. (¶¶ 19, 20, 21, 22)
- Section 12A did not apply to the successful resolution applicant. Having appealed to implement its plan and raised funds by mortgaging the debtor’s assets, it could not pursue the contrary withdrawal application in this appeal. Whether success in a CIRP altogether forecloses withdrawal was expressly left undecided. (¶ 29)
- Disputed factual allegations about possession were not determined under Section 62. The question concerning changes to the debtor’s board composition was also not examined. (¶¶ 30, 31)
Result
Appeals allowed; NCLAT order set aside and NCLT approval of 21 January 2019 affirmed. MSL directed to remit the offered additional Rs.50,72,237 for operational creditors. Withdrawal application dismissed. Resolution professional directed to take and hand over physical possession within four weeks with police and administrative assistance. Interim orders dissolved, connected applications disposed of; no costs.