NCLAT Dismisses Appeal by Astral Agro Ventures, Upholds CoC's Resolution Plan Approval

Tribunal rules PRA lacks locus standi to challenge resolution plan; imposes Rs. 15 lakh costs on appellant for delaying CIRP process.

In a significant ruling, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has dismissed the appeal filed by Astral Agro Ventures against the resolution plan approved by the Committee of Creditors (CoC) for Megi Agro Chem Ltd. The judgment, delivered by Justice N. Seshasayee and Mr. Arun Baroka, clarified the locus standi of a Prospective Resolution Applicant (PRA) in challenging the resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC).

Astral Agro Ventures, the appellant, sought to challenge the resolution plan approved by the CoC, citing procedural irregularities and the alleged disqualification of the successful resolution applicant under Section 29A of the IBC. However, the Tribunal held that the appellant, having failed to submit its resolution plan within the stipulated time, does not possess the locus standi to contest the CoC's decision.

The Tribunal emphasized that a PRA's role ceases after submitting its resolution plan, and it does not have a vested right to have its plan approved. The judgment referenced several precedents, including the landmark case of Arcelor Mittal v. Satish Kumar Gupta, to support its stance on the limited rights of a PRA in the insolvency resolution process.

Further, the Tribunal addressed the appellant's claims of procedural irregularities, such as the convening of CoC meetings within 24 hours and the lack of detailed deliberations in meeting minutes. The Tribunal found these irregularities to be minor and not affecting the legality of the resolution process. It refrained from adjudicating the alleged disqualification under Section 29A, leaving it to the Adjudicating Authority under Section 31 to ensure legal compliance of the resolution plan.

The judgment underscored the importance of adhering to the timelines prescribed under the IBC to maximize the asset value of the corporate debtor and prevent delays in the resolution process. It recommended that objections raised by PRA or unsuccessful resolution applicants should be considered by the Adjudicating Authority during the approval of resolution plans to avoid duplication and save time.

The Tribunal imposed a cost of Rs. 15 lakh on Astral Agro Ventures for unnecessarily interfering with and delaying the resolution process. The costs are directed to be distributed equally among the operational creditors of Megi Agro Chem Ltd., or added to the assets of the corporate debtor for disbursement as per the waterfall mechanism under Section 53 of the IBC.

The ruling serves as a reminder to PRAs and stakeholders involved in the insolvency resolution process of the importance of timely and earnest participation and the limitations on challenging CoC's decisions post-submission of resolution plans.

Bottom Line:

The Prospective Resolution Applicant (PRA) does not have the locus standi to challenge the resolution process or the approval of a resolution plan by the CoC, particularly when the PRA fails to submit its resolution plan within the stipulated time and has not participated meaningfully in the process.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 29A, 31, 53, and Regulation 36A(8), Regulation 19(2) of the CIRP Regulations, 2016

Astral Agro Ventures v. Mr. Vakati Balasubramanyam Reddy, (NCLAT)(Principal Bench, New Delhi) : Law Finder Doc Id # 2810548