The NCLAT has turned down Tata Steel’s appeal against an NCLT order passed in April 2018, which directed Bhushan Power and Steel’s Resolution Professional (RP) and Committee of Creditors (CoC) to consider the resolution plan submitted by Liberty House.
Bhushan Power and Steel was one of the first 12 cases referred by the Reserve Bank of India for insolvency proceedings. The dispute in the present cases pertains to selection of the resolution plan. By the end date for submission of resolution plans (February 8, 2018), Tata Steel and JSW Steel had submitted their resolution plans. Liberty House, however, submitted its resolution plan a few days later.
The NCLT in April, 2018 directed the RP and CoC to consider the resolution plan submitted by Liberty House. The present appeal is a challenge to the NCLT order. However, during the month of August, 2018, the NCLAT also passed orders allowing submission of ‘revised financial offers’, by ‘all’ resolution applicants. Tata Steel, while submitted a revised financial offer to stay in the race, also objected to this direction of the NCLAT.
More recently, the CoC has by a 97.12 % majority voted in favour of JSW Steel’s resolution plan.
The NCLAT, while disposing of this appeal, heavily relied on its judgment passed in the case of Binani Cements, and the Supreme Court’s judgement in the case of Essar Steel. The Bench made the following two broad observations insofar as the insolvency process is concerned:
1) Before the approval of a resolution plan, there is no vested right or fundamental right that accrues to any resolution applicant. However, if the resolution plan has been approved by the NCLT, the resolution applicant will have the statutory right to appeal.
2) The improved financial offer submitted by a resolution applicant is a continuation of the resolution plan. The NCLAT further noted the contents of the process document to find that the CoC had the absolute discretion to update, amend or supplement the information, right to change, delay or otherwise annul or cease the resolution process.
In view of the aforesaid observations, the NCLAT then recorded,
“In this background, while we hold that this appeal preferred by ‘Tata Steel Limited’ is premature, uncalled for, in absence of any final decision taken by the NCLT under Section 31, this appeal is also not maintainable.”
The NCLAT, while dismissing the appeal, remitted the case back to the NCLT and directed the RP to ‘immediately place the ‘approved Resolution Plan’ before the NCLT for its order‘. Much like the NCLAT did for Essar while remitting the case back to the NCLT, it has established the jurisdiction of the NCLT for disposing of the resolution plan application. The NCLAT ruled that, at the time of consideration of the approved ‘Resolution Plan’ of ‘JSW Steel’, the NCLT will only ensure that all the stakeholders, particularly the ‘Operational Creditors’ are treated similarly.
“In case, the Adjudicating Authority is of the opinion that the discrimination has been made between the ‘Financial Creditors’ and the ‘Operational Creditors’, it may give opportunity to the ‘JSW Steel’ to improve its plan and thereby, by substituting the approved ‘Resolution Plan’ with such improvement“, the Bench ruled.
By doing so, all that the NCLT can now adjudicate on, is the resolution plan submitted by JSW Steel, within the boundaries set by the NCLAT: that is of ensuring fairness of treatment provided to creditors.
Senior Advocates Dr. Abhishek Manu Singhvi, Sudipto Sarkar and Rajiv Nayar, briefed by AZB & Partners Partner V.P. Singh and Karanjawala & Co Partner Ruby Singh Ahuja, appeared for Tata Steel.
Senior Advocates Dhruv Mehta and A.S. Chandhiok appeared for Liberty House.
Senior Associate Abhinav Vasisht along with Shardul Amarchand Mangaldas lawyer Misha appeared for RP.
Senior Advocates Kapil Sibal and Amit Sibal, briefed by L&L Partners Partner Manmeet Singh, represented JSW Steel Limited.
Senior Advocates Tushar Mehta and Ramji Srinivasan along with Cyril Amarchand Mangaldas Partners Bishwajit Dubey and Spandan Biswal appeared for Committee of Creditors.