No IBC Provision That Resolution Plan Should Match Liquidation Value; Approved Resolution Plan Can’t Be Withdrawn Under S12A

Case covered:

MAHARASHTRA SEAMLESS LIMITED …APPELLANT

VERSUS

PADMANABHAN VENKATESH & ORS. …RESPONDENTS

Facts of the case:

These proceedings arise out of Corporate Insolvency Resolution Process (CIRP) involving United Seamless Tubulaar Private Limited, the corporate debtor. The successful Resolution Applicant, Maharashtra Seamless Ltd. (MSL) is the appellant in C.A. No. 4242 of 2019. The total debt of the corporate debtor was Rs. 1897 crores, out of which Rs.1652 crores comprised of term loans from two entities of Deutsche Bank. These are DB International (Asia) Limited and Deutsche Bank AG, Singapore Branch. There was also debt on account of working capital borrowing of Rs. 245 crores from another bank, being Indian Bank. Said Indian Bank is the initiator of the CIRP, who filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (the Code). DB International (Asia Ltd.) is the appellant in C.A. No.4967-68 of 2019. A concern by the name of UMW had provided a corporate guarantee to Deutsche Bank, Singapore as collateral to the said term loan. The Adjudicating Authority, the National Company Law Tribunal, Hyderabad Bench (NCLT) by an order passed on 21st January 2019 approved the resolution plan submitted by MSL in an application filed by the Resolution Professional. This resolution plan included an upfront payment of Rs. 477 crores. Ancillary directions were issued by the Adjudicating Authority while giving approval to the said resolution plan with the finding that the said plan met all the requirements of Section 30(2) of the Code. This order was carried up in appeal before the National Company Law Appellate Tribunal (NCLAT), being the Appellate Authority under the Code by two persons who were parties before the NCLT. They were one of the promoters of the corporate debtor, Padmanabhan Venkatesh, and the Indian Bank. These appeals were registered as Company Appeal (AT) (Insol.) Nos. 128 & 247 of 2019. The appellant in Company Law (AT) (Insol.) No. 128/2019 was said, Padmanabhan Venkatesh. The appellant in Company Law (AT (Insol.) No. 247 of 2019 was the Indian Bank. These two appeals were heard with another appeal filed by the successful Resolution Applicant (MSL) against an order of the Adjudicating Authority passed on 28th February 2019. The MSL’s appeal was registered as Company Appeal (AT) (Insol.) No. 220 of 2019.

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Observations of the court:

We, accordingly, allow the appeal of MSL and set aside the order of the NCLAT under appeal before us. The order of the Adjudicating Authority passed on 21st January 2019 is affirmed. MSL, however, shall remit an additional sum of Rs.50,72,237/- to the Resolution Professional for further remittance to the operational creditors as per their dues. This sum has already been offered to the operational creditors, as recorded in the impugned order. We dismiss the I.A.No.115118 of 2019 taken out in connection with C.A.No.4242 of 2019. C.A.No.4967-68 of 2019 are also allowed on the same reasoning. In view of our aforesaid findings and these directions, we are not going into the question as to whether any illegality was committed by MSL as regards the change in the composition of the Board of Directors of the corporate debtor.

We, accordingly, direct the Resolution Professional to take physical possession of the assets of the corporate debtor and hand it over to the MSL (appellant in C.A.No.4242 of 2019) within a period of four weeks. The police and administrative authorities are directed to render assistance to the Resolution Professional to enable him to carry out these directions.

All interim orders stand dissolved and connected applications are disposed of.