The National Company Law Appellate Tribunal (NCLAT) has ruled that unsuccessful resolution applicants have no rights to challenge a resolution plan once it has been cleared by the Committee of Creditors (CoC) of a corporate debtor.
In its judgment rejecting a plea filed by Hindustan Oil Exploration Company against private equity firm Atyant Capital’s plan for JEKPL, a part of the Jubilant Group, a three-member Bench of the NCLAT ruled that even if there were some changes in the agreed upon resolution plan as an indirect result of the outbreak of the coronavirus pandemic, it “would not be uncalled for”.
“Outbreak of Covid-19 pandemic has slowed down the economic activity and operations have been adversely impacted. Viewed in that context, some necessary changes in the agreed terms and extension of time for implementation would not be uncalled for,” the Bench, headed by Justice Bansi Lal Bhat, said in its judgment.
Finality to approved plans
The NCLAT decision is likely to put an end to unsuccessful resolution applicants trying to delay and derail insolvency processes which are nearing ending and completion. It will also give finality to approved plans, unless cases of material irregularity surface in the corporate insolvency resolution process.
Hindustan Oil Exploration had objected to the implementation of Atyant Capital resolution plan, alleging that the latter had, in connivance with the CoC of JEKPL, changed the terms of the plan after it had been approved.
The company further alleged that since the resolution plan had already been approved, the role of the CoC with the JEKPL had ended and, therefore, they were in position to be able to renegotiate the terms of the plan with Atyant Capital.
The appellate tribunal, however, rejected the contention and said that even if the plan was altered a little bit and some time extension was sought, it was not a case of “alleged material irregularity in the corporate insolvency resolution process”.
“The NCLAT is within its powers to decide material or immaterial irregularity. Essentially, what the court is saying is that due to Covid, there might have been minor changes submitted by the successful resolution applicant before Covid. That does not make it a material irregularity, which can give the other applicant a chance to challenge it,” said Vidisha Krishan, partner at MV Kini & Co.
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