The National Company Law Tribunal, Indore (“Adjudicating Authority”) in the matter of, Naveen Kumar Sood, Resolution Professional of Ujaas Energy Limited v. Ujaas Energy Limited (“Corporate Debtor”) has vide its order dated January 6, 2023 rejected an interlocutory application filed by the resolution professional of Ujaas Energy Limited for approval of the resolution plan on the ground that the Committee of Creditors (“CoC”) cannot extinguish right of the particular secured financial creditor to proceed against the personal guarantor of the Corporate Debtor, in garb of its Commercial Wisdom.
Corporate Debtor was admitted in the Corporate Insolvency Resolution Process (“CIRP”) on September 17, 2019. Mr. Navin Khandelwal was appointed as Interim Resolution Professional (“IRP”) and who was later replaced by Mr. Naveen Kumar Sood (“Resolution Professional”). The Resolution Professional Published Form-G on December 3, 2020.
The resolution plan submitted by consortium of SVA Family Welfare Trust and M&B Switchgears (“Resolution Applicant”), was approved by the COC with 78.04% votes on August 30, 2021, and an application bearing number IA/190(MP) 2021 was filed by the Mr. Naveen Kumar Sood, Resolution Professional under Section 30(6) read with Section 31 of Insolvency & Bankruptcy Code, 2016 (“Code”) for approval of the resolution plan submitted by the Resolution Applicant.
The Resolution Applicant had proposed to pay a sum of Rs.74,81,75,744/-. The Resolution Applicant had proposed higher amount to all the secured financial creditors to extinguish their right on Personal Guarantors.
The Bank of Baroda being a dissenting financial creditor and member of CoC with 5.83% voting share rejected that the said resolution plan which sought extinguishment of liability of personal guarantors of the corporate debtor. The other lender banks i.e., Union Bank of India, State Bank of India, Axis Bank Limited and RBL Bank Limited had agreed to the proposal of the Resolution Applicant made in the resolution plan to extinguish the personal guarantee.
Bank of Baroda has also filed applications under section 95 of the Code against the personal guarantors before the Adjudicating Authority and the same are pending.
The Adjudicating authority has held that CoC can take any commercial decision relating to insolvency of the corporate debtor only, the CoC cannot extinguish right of the particular secured creditor to proceed against the personal guarantor of the corporate debtor under the garb of its commercial wisdom. Such provision in the resolution plan is not only prejudicial to the right of such secured creditor but also against the provisions of law. Hence, we cannot approve such resolution plan as it contravenes the provision of section 30(2) (e) of the Code.
Further such resolution plan cannot be approved and deserves to be rejected as the CoC by majority votes cannot enforce its decision for extinguishment of the right of the dissenting creditor to proceed against the personal guarantor.
Please find attached a copy of the order.
This update has been contributed by R. Sudhinder (Senior Partner) and Ekta Bhasin (Principal Associate)
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