The High Court ruled that all creditors and stakeholders are bound by a Resolution Plan approved by the NCLT/NCLAT, regardless of their consent.
The Delhi High Court Single Bench of Justice Dharmesh Sharma observed that all creditors and stakeholders are bound by a Resolution Plan approved by the NCLT/NCLAT, regardless of their consent, and confirms that Section 32A of the IBC provides immunity to corporate debtors and their assets post-approval, thereby ensuring that the successful resolution applicant operates without the burden of unresolved claims.
In a recent high court ruling, the petitioner, an operational creditor of Bhushan Steel & Power Ltd., filed a writ petition under Article 226 of the Constitution of India, seeking various reliefs aimed at protecting the interests of bona fide creditors. The petitioner sought directives from the respondent banks to secure funds that had allegedly been siphoned off by former promoters and requested the Reserve Bank of India to issue appropriate instructions under Section 35A of the Banking Regulation Act, 1949. The National Company Law Tribunal (NCLT) had previously admitted Bhushan Steel & Power Ltd. to the Corporate Insolvency Resolution Process (CIRP) in July 2017, acknowledging substantial claims from financial and operational creditors.
Following the admission into CIRP, the Committee of Creditors (CoC) approved a Resolution Plan from JSW Steel, which the NCLT ratified in September 2019. Operational creditors, including the petitioner, were allotted a significantly reduced sum of ₹350 crores. The petitioner argued that the respondents' inaction had led to losses for the creditors, claiming that the resolution applicant was a related party and therefore ineligible under the Insolvency and Bankruptcy Code (IBC). Additionally, the petitioner highlighted the Directorate of Enforcement's attachment of assets worth over ₹4,000 crores and contended that the CoC should have taken measures to recover these funds.
The court ultimately deemed the writ petition unsustainable, rejecting the petitioner’s claims regarding the related party status of the resolution applicant and the actions of the CoC. It underscored that the approved Resolution Plan was binding on all creditors and aligned with the objectives of maximizing the Corporate Debtor’s value. The court’s interpretation of Section 31 of the IBC affirmed that all creditors and stakeholders are bound by the NCLT/NCLAT-approved Resolution Plan, regardless of their consent, a stance supported by recent Supreme Court jurisprudence. The ruling clarified that Section 32A of the IBC provides immunity to corporate debtors and their properties upon approval of a resolution plan, ensuring that the successful resolution applicant starts on a "clean slate" without unresolved claims.
In conclusion, the high court dismissed the writ petition, finding no grounds for issuing prerogative writs or evidence of flawed actions by the respondents. The court imposed costs on the petitioner, citing the unnecessary burden on the judicial system. This case reinforces the binding nature of approved resolution plans under the IBC and the protections afforded to corporate debtors during the insolvency process.
Subscribers can access the Case, including Case Analysis, Ratio Decidendi, Headnotes, Briefs, Case Research, Cited Case Laws, Case Law Cross-references, and the latest updates on Statutes, Notifications, Circulars, Guidelines Press Release and more.
Click on the Citation/Link to access these resources
留言