Facts
The Appellant, the erstwhile Managing Director of Veda Biofuel Limited (the Corporate Debtor), challenged the order dated 26.05.2020 passed by the Adjudicating Authority (NCLT).
Source reference: p. 2The NCLT had rejected IA No. 64/2020, which sought approval of a "restructuring plan" submitted by the promoter and approved by the Committee of Creditors (CoC) in its 20th meeting.
Source reference: p. 3-4The Adjudicating Authority rejected the plan on the grounds that it did not qualify as a "Resolution Plan" under the Insolvency and Bankruptcy Code, 2016 (IBC) and subsequently ordered the liquidation of the Corporate Debtor under Section 33(1)(b).
Source reference: p. 2, 4During the pendency of the appeal, the assets of the Corporate Debtor were sold in liquidation, and a sale certificate was issued on 03.12.2024.
Source reference: p. 5Issues
1. Whether a restructuring plan submitted by a promoter, without following the formal Expression of Interest process, qualifies as a valid Resolution Plan under Section 30(2) of the IBC.
Source reference: p. 4-52. Whether the Adjudicating Authority is mandated to order liquidation under Section 33(1)(b) when no compliant Resolution Plan is approved.
Source reference: p. 6Law Applied
Section 30(2) of the IBC, which mandates specific statutory requirements and compliances for a Resolution Plan to be valid.
Source reference: p. 4, 5Section 33(1)(b) of the IBC, which requires the Adjudicating Authority to pass a liquidation order if the Resolution Plan is rejected for non-compliance with the Code.
Source reference: p. 2, 6The court also distinguished between a Resolution Plan and a proposal for withdrawal under Section 12A of the IBC, noting that a promoter's restructuring proposal is more akin to the latter and must adhere to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
Source reference: p. 5-6Reasoning
The Appellate Tribunal observed that the "restructuring plan" approved by the CoC was not a Resolution Plan within the statutory framework of the IBC.
Source reference: p. 5The Tribunal reasoned that the plan was not submitted in response to an Expression of Interest (EOI) invited by the Resolution Professional, a mandatory step under the CIRP Regulations.
Source reference: p. 6The court held that a promoter’s restructuring proposal should be treated as a proposal for withdrawal under Section 12A rather than a Resolution Plan.
Source reference: p. 5Since the plan failed to meet the mandatory requirements of Section 30(2), the Adjudicating Authority was correct in rejecting it.
Source reference: p. 6Consequently, the Tribunal found that the failure to produce an approved, compliant plan necessitated a liquidation order under Section 33(1)(b).
Source reference: p. 6Furthermore, the court noted that since the liquidation process had concluded with the issuance of a sale certificate, the appeal had become infructuous.
Source reference: p. 6Holding
The Tribunal answered the issues in the negative and affirmative respectively, holding that the restructuring plan was legally non-compliant and the liquidation order was justified.
The court affirmed the Adjudicating Authority’s decision, stating that no grounds existed to interfere with the impugned order.
Source reference: p. 7The Appeal was dismissed, both on merits and for being infructuous due to the completed sale of assets in liquidation.
Source reference: p. 7Original Court PDF
Mr. Vijay Kumar PenmetsavsMr. Sisir Kumar Appikatle & Ors & Ors.
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