The National Company Law Court (“NCLT”), Mumbai Bench, consisting of Justice PN Deshmukh (Judicial Member) and Shri Shyam Babu Gautam (Technical Member), while ruling on a motion filed in Edelweiss Asset Reconstruction Co. Ltd. against Octaga Green Power and Sugar Company Ltd.., reiterated that the liquidation of the Debtor Company was the last resort and therefore ordered the Creditors’ Committee to reasonably reconsider the rejected Resolution Plan. The CoC included only two creditors and approval was granted by one of them while the other rejected the resolution plan, so the minimum statutory threshold of 66% votes for approval n could not be reached.
Edelweiss Asset Reconstruction Co. Ltd. (“Financial Creditor/Edelweiss”) had filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) before NCLT, Mumbai Bench, requesting the commencement of proceedings Insolvency Resolution (“CIRP”) against Octaga Green Power and Sugar Company Ltd. (“Debtor Company”) and Debtor Company has been admitted to CIRP Mr. Gaurav Ashok Adukia is the resolution professional.
The Creditors’ Committee (“CoC”) consisted of Edelweiss and State Bank of India, which held 52.40% and 47.60% of the voting rights respectively.
Mr. Basab Paul and another (“Claimants”) had submitted a resolution plan for the debtor company which was approved by Edelweiss and rejected by the State Bank of India. Consequently, the statutory threshold of 66% for the approval of the plan could not be reached. No reason has been assigned by the State Bank of India to reject the resolution plan and the same has been done without mind enforcement.
Subsequently, the CdC filed a request with the contracting authority requesting the liquidation of the debtor company which is awaiting judgment. The plaintiffs filed a petition with the adjudicating authority challenging the CoC’s rejection of their resolution plan.
The claimants argued that the resolution plan provided for the payment of Rs. 21,00,00,000/- which was far above the liquidation value of Rs. 18,00,00,000/-. In addition, the claimants had also provided a bank guarantee for the earnest money deposit with the resolution plan and had revised the plan several times to improve it.
The State Bank of India argued that the resolution seeker has no vested right to have the resolution plan approved by the CoC members. Plaintiffs have had multiple opportunities to clarify questions about the source of funds, past conduct of the resolution plaintiff, inflated land value, etc., but these questions have not been satisfactorily clarified. The claimants failed to demonstrate implementation of the plan and had various shortcomings and issues.
The Chamber observed that the primary objective of the BAC is to rescue the Corporate Debtor in distress and to revive her. All attempts should first be made to revive the business and make it a going concern with liquidation being the last resort. The Chamber considered that the Debtor Company is an active business of 125 workers and employees whose means of subsistence would be affected in the event of liquidation.
The Chamber ordered the CoC to review/reconsider the Resolution Plan in a manner that is fair, reasonable, and consistent with the IBC. Four days were given for a reconsideration and the resolution professional was instructed to update the status thereafter.
Case title: Edelweiss Asset Reconstruction Co. Ltd. against Octaga Green Power and Sugar Company Limited.
Case no: CP (IB) 2987/MB/C-II/2018
Counsel for the Applicant: Mr. Gaurav Joshi, Senior Counsel
Advice for the resolution professional: Mr. Dhiraj Mhetre, lawyer
Council of the CoC – SBI: Mr. Rishi Thakur, Lawyer
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