NCLAT reaffirmed the integrity of approved resolution plans, stating that no modifications should be made after approval.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench led by Justice Rakesh Kumar Jain (Judicial Member) and Mr. Indevar Pandey (Technical Member) reviewed an appeal and held that the Adjudicating Authority exceeded its jurisdiction by modifying the approved resolution plan, emphasizing that once a resolution plan compliant with statutory requirements is approved by the Committee of Creditors, it cannot be altered post-approval; thus, any modifications regarding lease premiums and rentals during the Corporate Insolvency Resolution Process were not permissible.
In the case of IB-1059/ND/2018 involving M/s Shubhkamna Buildtech Pvt. Ltd., the Adjudicating Authority admitted the application on 26.11.2018. The resolution plan proposed by the appellants was approved by the Committee of Creditors (CoC) in its sixth meeting on 09.10.2019, achieving a significant affirmative vote share of 87.57% by 17.10.2019. Following this approval, the Resolution Professional (RP) sought the Adjudicating Authority’s approval for the resolution plan through CA No. 485 of 2019, citing Section 30(6) and Section 31 of the Insolvency and Bankruptcy Code (IBC), alongside Regulation 39(4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
During the consideration of the RP’s application, objections were raised by the New Okhla Industrial Development Authority and the Greater Noida Industrial Development Authority. The objectors highlighted clause 8.9 of the resolution plan, which proposed that both authorities would be restrained from future instalments, penalties, and lease rents, with the plan indicating payment of NIL amounts to government departments based on the absence of anticipated liquidation value. They also contended that the lease premium and dues incurred during the Corporate Insolvency Resolution Process (CIRP) period should be classified as part of the CIRP costs as defined under Regulation 31.
The Adjudicating Authority addressed these objections by affirming that outstanding lease rentals and premiums accrued from the initiation of CIRP on 26.11.2018 until the approval of the resolution plan were indeed part of the Insolvency Resolution Process costs, as stipulated in Section 5(13) of the IBC. The Authority emphasized the Corporate Debtor's continued occupancy of the premises, necessitating ongoing lease payments, and directed the authorities to furnish detailed accounts of the outstanding amounts within 15 days. The Tribunal reinforced that the obligations concerning lease rentals persisted despite the moratorium under the IBC, especially in light of the lease deeds established with both authorities.
In the appeal before the NCLAT, the appellants argued that the Tribunal’s alteration of the resolution plan post-approval contravened established legal principles. Citing precedents, including Mathuraprasad C Pandey & Ors. v. Partiv Parikh RP on Omni Projects (India) Limited, the NCLAT affirmed that a resolution plan compliant with statutory requirements must remain unaltered. The NCLAT ultimately upheld the appeal, setting aside the impugned order and reinforcing the applicability of the lease premium and rent obligations as determined in prior decisions. It maintained that such modifications should not be acknowledged, allowing the approved resolution plan to proceed as originally intended, thus preserving the financial feasibility projected by the appellants. No costs were awarded in this decision, and the matter concerning any ongoing disputes will be subject to the resolution of the Supreme Court in Civil Appeal No. 901 of 2023.
Mr. Sandeep Bhuraria and Ms. Nishtha Grover, Advocates represented the Appellant.
Mr. Abhishek Anand and Mr. Nipun Gautam, Advocates appeared for Respondent No. 1/RP.
Mr. Saurabh Jain, Advocate appeared in IA No. 4666/2022.
Mr. Arjun Singh Bhati, Advocate appeared for Applicant in IA No. 4731/2022.
Mr. Abdhesh Chaudhary, Ms. Geetanjali Setia, Mr. Vinayak Mishra, Mr. Nishikant Singh, Ms. Meena Yadav and Ms. Manisha Suri, Advocates appeared for Respondent No. 2/Noida.
Mr. U. N. Singh, Advocate represented the Respondent No. 3/GNIDA.
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