IBC

Ramkrishna Forgings Ltd Vs. Ravindra Loonkar:  NCLT Direction For Fresh Valuation Of Assets  After Approval Of Resolution Plan By CoC Was Not Justified

The Supreme Court in Ramkrishna Forgings Limited Vs. Ravindra Loonkar, RP  (Civil Appeal No. 1527 of 2022 ) has held that the order of the NCLT to get fresh valuation done after approval of Resolution Plan by Committee of Creditors  was not justified. The Supreme Court also emphasized the need for passing reasoned order.

Brief Facts

CIRP was initiated in the matter of ACIL vide order of NCLT dated 08.08.2018.  Ramkrishna Forging Ltd. submitted various revised Resolution Plans final of which was submitted on 05.08.2019 having financial proposal of Rs. 129.5 crore. The Financial Creditors were to get upfront payment of Rs. 84.54 Crore. Final plan also provided for monetization of land situated at Manesar which would go to the Financial Creditors.

The resolution plan was approved by the by Committee of Creditors on 14.08.2019 by 88.56% votes. Resolution Plan was submitted before the NCLT for approval. Hair cut under the  Resolution plan was about 94.25%.  The Resolution Plan was  kept in abeyance by the NCLT. The NCLT directed Official Liquidator to provide exact figures/value of assets. The appeal was filed against this order before the NCLAT, which upheld the order of the NCLT.  Aggrieved by the same an appeal was filed before the Supreme Court.

Findings of the Court

The Supreme Court observed that no objection has been raised to the Resolution Plan by any quarter regarding any irregularity/deficiency by Resolution Professional, the Resolution Application or Committee of Creditors. Statutory requirement of valuation by the two registered valuers had been complied with. Figures in both reports were not at great variance.

The Supreme Court relied on K Sashidhar v Indian Overseas Bank,(2019) 12 SCC 150, Committee of Creditors of Essar Steel India Ltd. v Satish Kumar Gupta (2020) 8 SCC 531, Maharastra Seamless Ltd., Kalpraj Dharamashi Vs. Kotak Investment Advisors Ltd. (2021) 10 SCC 401Pratap Technocrats Private Limited v Monitoring Committee of Reliance Infratel Limited, (2021) 10 SCC 623 and observed that  CoC decision is not to be subjected to unnecessary judicial scrutiny and intervention.  Ordering for revaluation of the assets by the Official Liquidator was not justified. The Supreme Court further observed that NCLT and NCLAT erred to fully recognize that under the Resolution Plan, the Corporate Debtor was set to be revived and not liquidated. Thus, the minimum mandatory component in the Resolution Plan was only a reflection of the actual money including upfront payment which would go towards FCs.  The Resolution Plan also provided for the monetization proceeds of the land as also the avoidance amounts to go to the FCs of the Corporate Debtor.

The Court further observed on the limited jurisdiction of the NCLT under Section 31 (2)  as under:

31. It is worthwhile to note that the Adjudicating Authority has jurisdiction only under Section 31 (2) of the Code, which gives power not to approve only when the Resolution Plan does not meet the requirement laid down under Section 31 (1) of the Code, for which a reasoned order is required to be passed. We may state that the NCLT’s jurisdiction and powers as Adjudicating Authority under the Code flow from the Code and the Regulations thereunder.

The Court finally held that the order of the NCLT can not stand judicial scrutiny in fact or law. The Court observed that there may have been a situation where due to glaring facts an order could be left untouched but only if detailed reasoning, disclosing the facts for being persuaded to embark on such path, were discernible in such order. The order in this case unfortunately was cryptic and bereft of detail.  The Supreme Court also emphasized on importance of reasoned order and  observed that recording of reasons, and not just reasons but cogent reasons, for orders is a duty on Courts and Tribunals.

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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

Mukesh Kumar Suman

Mukesh Kumar Suman

Mukesh Kumar Suman is an advocate based at Delhi. He has rich experience in civil, criminal, commercial, arbitration and corporate insolvency matters. He regularly appears before District Courts, NCLT, NCLAT, High Court and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

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