This issue of LexCognito, which in Latin means 'awareness about law', seeks to provide you an insight into significant legal and regulatory developments that have taken place very recently in India.
Date: 4 December 2019
Company Court clears Insolvency Resolution Plan framed by Creditors themselves
In the matter of Technology Development Board Vs. Logic Eastern India Private Limited, the National Company Law Tribunal, Principal Bench, Delhi (“NCLT”) has approved a very unique resolution plan which was framed by the Committee of Creditors themselves for the purpose of saving the Corporate Debtor from going into liquidation in the absence of any external resolution applicant.
The Technology Development Board, a statutory body established by the Government of India under the Technology Development Board Act, had filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IB Code”) for initiation of the Corporate Insolvency Resolution Process of Logic Eastern India Private Limited (“Corporate Debtor”), which was admitted by the Hon’ble NCLT on 18 July 2018. As a consequence, the corporate insolvency resolution process commenced and moratorium was imposed in terms of Section 14 of the IB Code. During the insolvency process, the Resolution Professional had invited expression of interest from the prospective resolution applicants intending to submit the resolution plan for resolving the insolvency of the Corporate Debtor. However, no external resolution applicant came forward to submit any expression of interest. However, instead of pushing the Corporate Debtor into liquidation, the financial creditors themselves framed a resolution plan for resolving the insolvency of the Corporate Debtor. The said plan was submitted with the Hon’ble NCLT for approval under Section 30(6) of the IB Code.
Since no resolution applicant had come forward to revive the Corporate Debtor, the Committee of Creditors unanimously decided not to liquidate the Corporate Debtor as it would have resulted in a complete loss to the creditors as the liquidation value was insufficient and employees would lose their employment. Under the Resolution Plan framed by the Committee of Creditors, besides a complete financial restructuring, a change in top management and a monitoring mechanism was proposed.
While examining the Resolution Plan to ensure compliance with the IB Code, the Hon’ble NCLT stated that there is no rule of law laying down the proposition that an operational creditor is to be treated at par with the financial creditor. While holding so, the Hon’ble NCLT relied upon the case of Swiss Ribbons Private Limited and Anr. Vs. Union of India & Ors., wherein the Supreme Court of India held that preserving the corporate debtor as a going concern, while ensuring maximum recovery for all creditors being the objective of the Code, financial creditors are clearly different from the operational creditors. While ensuring compliance with the IB Code, the Hon’ble NCLT approved the Resolution Plan to revive the Corporate Debtor.
Our Partner Rajan D Gupta acted as Court appointed Resolution Professional of the Corporate Debtor.
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Chambers of Rajan & Indraneel is a premier full service law firm headquartered at New Delhi, India. The Firm represents amalgamation of vast experiences and practices of two eminent lawyers. Indranil Ghosh is highly reputed as a disputes lawyer. He was a senior partner and head of litigation practice in one of the oldest Indian law firm Fox Mandal for several decades before setting up his own practice. Rajan D Gupta is a rank holder Chartered Accountant turned Corporate Lawyer. He is also a licensed Insolvency Resolution Professional. He has been associated with internationally renowned big law firms in past and has held senior level positions in firms like PwC, Fox Mandal, Khaitan & Co. and SRGR Law, etc. before starting the Firm.
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