Hello! Welcome back to our updates on the insolvency law landscape in May 2024 in India.
In the News
The Competition Commission of India (CCI) cleared Adani Power’s proposed acquisition of Lanco Amarkantak Power. Adani Power proposes to acquire 100 per cent share capital and control of Lanco Amarkantak Power, pursuant to the corporate insolvency resolution process (CIRP) initiated under the Insolvency and Bankruptcy Code, 2016 (IBC).
Aircraft lessor Wilmington Trust SP Services has moved NCLAT, filing an appeal against an earlier order of NCLT, which had dismissed its petition for initiating CIRP against low-cost carrier SpiceJet. Wilmington, the aircraft lessor based in Dublin, Ireland had moved the petition against SpiceJet in June 2023 over unpaid dues. This was dismissed by the NCLT earlier in January.
In other news, real estate developer Snehanjali S. B. Developers Pvt Ltd has been admitted to CIRP pursuant to a petition filed by nearly 67 prospective homebuyers. The default occurred due to non-fulfilment of its obligations under the sale agreements executed with the homebuyers. Considering the default, the NCLT admitted it to CIRP and appointed Dinesh Kumar Deora as the interim resolution professional.
From the Docket
The Supreme Court in Deccan Value Investors v. Dinkar Venkatasubramanian, following the ratio in Ebix Singapore, held that once a resolution plan has been approved by the committee of creditors (CoC), a successful resolution applicant can neither withdraw nor modify a resolution plan. In this regard, the court further held that the assumption is that the resolution applicant would submit the revival/resolution plan specifying the monetary amount and other obligations, after an in-depth analysis of the fiscal and commercial viability of the corporate debtor. Pointing out the ambiguities or lack of specific details or data, post-acceptance of the resolution plan by the CoC, should be rejected, except in an egregious case where data and facts are fudged or concealed.
The NCLAT in Vijay Saini v. Shri Devender Singh held that for computing voting with regard to proposal under Section 12A of IBC, which provides for withdrawal of application under sections 7, 9 and 10 of IBC, the voting has to be computed as per proviso to Section 25A (3) of IBC. Proviso to section 25A(3) of IBC provides that the authorised representative should cast vote in respect of each financial creditor to the extent of their voting share. It has been further clarified that a proposal under Section 12A which statutorily requires 90% votes for approval, would not stand approved if the majority (more than 50%) of homebuyers/financial creditors vote in favour of it as provided under Section 25A (3A) in light of the proviso in the said section which clearly states that the said section is not applicable for application under section 12A. The threshold of 90% vote must be met for approval of the proposal.
The NCLAT in One City Infrastructure v. Pratham Expofab held that the NCLT cannot direct the CoC to consider the settlement proposal of Suspended Management of Corporate Debtor, without granting an opportunity to be heard to the Successful Resolution Applicant.
In Supreme Construction Developers v. Puranik Builders, the NCLAT held that when an order was passed by the NCLT in the presence of counsels of both parties, the parties cannot claim that they were unaware of the order. Therefore, the limitation to file an appeal before NCLAT would commence from the date of order and not the date of upload of the order on the NCLT website.
The NCLAT in UV Asset Reconstruction v. Aircel, held that merely on the ground of subsequent ineligibility, the successful resolution applicant cannot be substituted with another entity/resolution applicant, after approval of Resolution Plan by the CoC and NCLT.
In Anjani Kumar Prashar v. Manab Datta, the NCLAT held that where amalgamation or demerger occurs under the Companies Act, 2013, resulting in the transfer or vesting of assets and liabilities to the amalgamated or transferee company, the transferee company cannot evade the obligations set forth in section 7 of the IBC claiming that disbursements were not directly made to it. Since the Corporate Debtor acquired the project under SARFAESI Act, it cannot circumvent the provisions of the IBC and deprive the homebuyers of their right.
DISCLAIMER
The content provided in this newsletter is intended for general awareness and should not be considered as legal advice. Readers are advised to consult with a qualified legal professional regarding any specific issues mentioned herein. If you have any questions about any of these developments or would like to see something different next month, reach out to us at knowledge@sarthaklaw.com.
Thank you for reading! We will be back again next month with more updates on insolvency law.