The National Company Law Appellate Tribunal (NCLAT), Chennai Bench comprising Justice M. Venugopal, Judicial Member and Ms. Shreesha Merla, Technical Member was recently hearing an appeal and held that the prior approval from the RBI is not always required for an Asset Reconstruction Company (ARC) to participate as a Resolution Co-Applicant. Emphasizing the primacy of the Insolvency and Bankruptcy Code over the SARFAESI Act and that liquidation should be the last resort for the revival and resolution of the Corporate Debtor, the NCLAT bench observed.
The National Company Law Appellate Tribunal (NCLAT) dismissed Company Appeal (AT) (CH) (Ins) No. 292/2021 as infructuous. The appeal was filed by the Interim Resolution Professional (IRP) dissatisfied with the rejection of a Resolution Plan by the Adjudicating Authority. The IRP argued that the appointment of the Liquidator by the Adjudicating Authority was contrary to statutory provisions.
In a previous matter, the NCLAT had stated that a Resolution Plan submitted by an Asset Reconstruction Company (ARC) requires prior approval from the Reserve Bank of India (RBI) under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act).
However, the NCLAT noted that Section 238 of the Insolvency and Bankruptcy Code, 2016 prevails over the SARFAESI Act and that RBI's prior approval is not always necessary for an ARC to participate as a Resolution Co-Applicant.
The NCLAT emphasized that the Adjudicating Authority should not have relied on the SARFAESI Act and should have considered the commercial wisdom of the Committee of Creditors (CoC). Furthermore, the NCLAT highlighted that the objective of the Code is the revival and resolution of the Corporate Debtor, and liquidation should be the last resort. As the liquidation was set aside, the present appeal became infructuous and was dismissed.
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