Liquidation Value

Valuation based on relevant material requires no interference | Dues not included in Resolution Plan are extinguished post approval | IBC provisions override SEZ Act and Rules – Noida Special Economic Zone Authority Vs. Manish Agarwal and Ors. – Supreme Court

In this judgment, the Hon’ble Supreme Court clarifies following issues:

A. Valuation does not call for any interference if it is based on relevant material on record.
B. All the dues is not the part of the Resolution Plan shall stand extinguished and no proceedings could be pressed into service or continues.
C. Claims pertaining to the transfer fees, etc. were not to be interfered with by courts or tribunals as the same stood related to the commercial wisdom of the CoC.
D. Does provision of IBC override Special Economic Zone Act and Rules?

Valuation based on relevant material requires no interference | Dues not included in Resolution Plan are extinguished post approval | IBC provisions override SEZ Act and Rules – Noida Special Economic Zone Authority Vs. Manish Agarwal and Ors. – Supreme Court Read Post »

The valuation of Corporate Debtor cannot be challenged by anyone when Resolution Plan has already been approved by NCLT | If CoC disagree with Valuation Report, it would direct for fresh valuation, where CoC agrees, the decision of CoC is final and there is no scope for judicial review – Jai Kishore Gupta Vs. Balaji Paper and Newsprint Pvt. Ltd. and Anr. – NCLT Kolkata Bench

Hon’ble NCLT Kolkata Bench held that:

(i) The valuation of the Corporate Debtor cannot be challenged at this stage by anyone when the resolution plan has already been approved by us.
(ii) Question of valuation carried out by two independent Registered Valuers duly registered with IBBI cannot be challenged by the Appellants as the same being a question of fact is normally not interfered by Courts.
(iii) If the CoC disagree, it would direct for fresh valuation. Where the CoC agrees, the decision of the CoC in this regard is final and there is no scope for judicial review.
(iv) It is the duty of the Financial Creditors and the Resolution Professional, to invoke personal guarantees as well as corporate guarantees furnished for the loans and advances taken by the Corporate Debtor for the purpose of maximisation of wealth of the Corporate Debtor.

The valuation of Corporate Debtor cannot be challenged by anyone when Resolution Plan has already been approved by NCLT | If CoC disagree with Valuation Report, it would direct for fresh valuation, where CoC agrees, the decision of CoC is final and there is no scope for judicial review – Jai Kishore Gupta Vs. Balaji Paper and Newsprint Pvt. Ltd. and Anr. – NCLT Kolkata Bench Read Post »

CoC under commercial wisdom can decide not to conduct third valuation even in case of significantly different between two estimates | There is no specific bar under IBC that a Creditor cannot claim its remaining debt from Guarantor which has not been recovered from Corporate Debtor – Hemant Shantilal Shah Vs. Care Office Equipment Ltd. and Ors. – NCLAT New Delhi

In the present facts of the case, the CoC after deliberations decided in the 6th CoC meeting that a third valuer would require to be appointed only if there was gulf of a difference in the stock valuation figures estimated by the two appointed valuers, while the 7th CoC meeting after noticing the valuation reports of the two valuers decided against the appointment of the third valuer. This position was later confirmed by the CoC.

Hon’ble NCLAT held that that being the considered business decision of the CoC, the supremacy of the commercial wisdom cannot be questioned by the Appellants. In fine, we do not find any infirmity in the conduct of the valuation exercise.

Further, held that when the CoC in its wisdom has approved the resolution plan which provided for the continued rights of the Financial Creditor against the personal guarantor and did away with the subrogation rights of the personal guarantors, the contention of the Appellant that the liability of the personal guarantors should stand extinguished, not being in sync with the commercial wisdom of the CoC, is clearly devoid of merit.

CoC under commercial wisdom can decide not to conduct third valuation even in case of significantly different between two estimates | There is no specific bar under IBC that a Creditor cannot claim its remaining debt from Guarantor which has not been recovered from Corporate Debtor – Hemant Shantilal Shah Vs. Care Office Equipment Ltd. and Ors. – NCLAT New Delhi Read Post »

NCLT directs Successful Resolution Applicant (CoC is solely formed by Unsecured Financial Creditor, who is also Successful Resolution Applicant) to consider matching the total Resolution Plan value at par with Liquidation Value – Hemi Gupta RP Rana Heavy Engineering Ltd. – NCLT Allahabad Bench

Hon’ble NCLT Allahabad Bench observes that CoC is solely formed by the Unsecured Financial Creditor, who is also the Successful Resolution Applicant.

Commercial wisdom of the Committee of Creditors in the matter of approval of resolution plan should be regarded. However, in the peculiar circumstances of the case where the financial creditor who is member of CoC itself is the SRA as well, we therefore, find it justifiable in passing such directions to the SRA to consider matching the total plan value at par with the liquidation value with corresponding pro-rata rise in the amount of disbursement.

NCLT directs Successful Resolution Applicant (CoC is solely formed by Unsecured Financial Creditor, who is also Successful Resolution Applicant) to consider matching the total Resolution Plan value at par with Liquidation Value – Hemi Gupta RP Rana Heavy Engineering Ltd. – NCLT Allahabad Bench Read Post »

Section 230 of Companies Act, 2013 which envisages one valuer cannot be the basis to bypass Liquidation Process Regulation 35 | Merely a Corporate Debtor has no valid or any marketable title the property, the value of the property cannot be described as Zero, the Registered Valuers are to value the property | Sharing of Valuation Reports with Potential Resolution Applicants by Liquidator is quite contrary to Liquidation Process Regulation 34(4) – Kineta Global Ltd. in consortium with Power Mech Projects Ltd. Vs. IDBI Bank Ltd. and Ors. – NCLAT Chennai

In this landmark decision, Hon’ble NCLAT holds that:
(i) The requirement of Regulation 35 of the liquidation process Regulations is a separate one from the process mentioned under Section 230 of the Companies Act, 2013 and Section 230 of the Companies Act, 2013 which envisages one valuer cannot be the basis to by pass the Regulation 35 of liquidation process Regulations.
(ii) Section 230 of the Companies Act, 2013 is quite broader and wider in its purview and the Code, 2016
(iii) Merely because in respect of the title of the property, if a Corporate Debtor has no valid or any marketable title, ipso facto, the value of the property cannot be described as Zero. The Registered Valuers are to value the property.
(iv) The Sharing of the Valuation Reports with the Potential Resolution Applicants by the Liquidator is quite contrary to the Regulation 34(4) of the Liquidation Process Regulations.

Section 230 of Companies Act, 2013 which envisages one valuer cannot be the basis to bypass Liquidation Process Regulation 35 | Merely a Corporate Debtor has no valid or any marketable title the property, the value of the property cannot be described as Zero, the Registered Valuers are to value the property | Sharing of Valuation Reports with Potential Resolution Applicants by Liquidator is quite contrary to Liquidation Process Regulation 34(4) – Kineta Global Ltd. in consortium with Power Mech Projects Ltd. Vs. IDBI Bank Ltd. and Ors. – NCLAT Chennai Read Post »

IBC does not expressly bar that Resolution Plan value should be over and above Liquidation value | The approval of Resolution Plan below Liquidation value is within the commercial wisdom of CoC – Mr. Ramesh Kesavan Vs. CA Jasin Jose, RP SD Pharmacy Pvt. Ltd. – NCLAT Chennai

Hon’ble NCLAT holds that:
(i) In the instant case, the approval of the Resolution Plan below the Liquidation value is within the commercial wisdom of the CoC as the Code does not expressly bar that the Resolution Plan value should be over and above the Liquidation value. Hence, there is no material irregularity.
(ii) The Resolution Plan is approved by a 100 % voting share of the CoC and there is no material irregularity on the face of record and we are satisfied that the Resolution Plan conforms to the requirement set out in Section 30(2) of the Code.
(iii) The Hon’ble Delhi High Court in TATA Steel BSL v. Venus Recruiters Pvt. Ltd. (2023) ibclaw.in 09 HC has held that there is no bar to proceed against the concerned Resolution Applicants before other Fora/Courts in cases of avoidance transactions.
(iv) It has been held in Ravi Shankar Vedam vs. Tiffins Barytes Asbestos and Paints Ltd. and Ors. (2023) ibclaw.in 394 NCLAT that the Promoter /Shareholder of the Corporate Debtor Company has no locus to challenge the Plan, after its approval. The ratio of the Judgement in the matter of M.K. Rajagopalan v. Dr. Periasamy Palani Gounder & Anr. (2023) ibclaw.in 60 SC, is not applicable to the facts of the attendant case on hand as the subject matter of that case is that there was an established material irregularity in the approval of the Plan and the issue of the ‘locus’ has not been specifically been addressed to. More ever, the Judgement of the Hon’ble Apex Court in the matter of Ravi Shakar Vedam (Supra) is dated 06.11.2023 and is later than M.K. Rajagopalan (Supra) which is dated 03.05.2022.

IBC does not expressly bar that Resolution Plan value should be over and above Liquidation value | The approval of Resolution Plan below Liquidation value is within the commercial wisdom of CoC – Mr. Ramesh Kesavan Vs. CA Jasin Jose, RP SD Pharmacy Pvt. Ltd. – NCLAT Chennai Read Post »

Moratorium u/s 14 of IBC does not impose any restriction on charging of any interest/Penal Interest during the CIRP period and it is not in the domain of the IBC, 2016 to decide any contractual interest liability – Mr. Arun Kumar Vs. Ms. Sripriya Kumar – NCLAT Chennai

In this important judgment, NCLAT held that:
(i) A simple and purposive reading of this Section 14 does not specify any ‘interest waiver’ during the period of moratorium.
(ii) The role of the RP under IBC, 2016 is only to collate the Claims and that he does not have any adjudicatory powers. The Claim of the Creditors does not stop on initiation of CIRP.
(iii) It is not in the domain of the IBC, 2016, even to decide any contractual interest liability. Section 14 does not impose any restriction on charging of any interest till the amount is paid. It is the commercial wisdom of the CoC with respect to the quantum of amounts to be paid to the Creditors within the Provisions of the Code.
(iv) There is no provision in the Code that enables the Corporate Debtor or a Guarantor to seek remission in the interest claims from the Financial Creditors solely on the basis that there is a Resolution Plan.
(v) Having not challenged the decision of the CoC in not qualifying him as a Prospective Resolution Applicant, the Promotor cannot now at the belated stage after the approval of the Plan by the Adjudicating Authority states that he is interested in offering a viable solution.
(vi)The Promotor being an MSME is given an opportunity under the Provisions of the Code to present a Plan. At the same time, the Code does not contemplate any kind of preference to be given to an MSME Promotor by the CoC while accepting a Resolution Plan.

Moratorium u/s 14 of IBC does not impose any restriction on charging of any interest/Penal Interest during the CIRP period and it is not in the domain of the IBC, 2016 to decide any contractual interest liability – Mr. Arun Kumar Vs. Ms. Sripriya Kumar – NCLAT Chennai Read Post »

Liquidation value found by the Registered Valuers cannot be allowed to be changed by CoC – Kotak Mahindra Bank Limited Vs. RP of Universal Buildwell Pvt. Ltd. – NCLAT New Delhi

NCLAT held that the liquidation value fixed by the Valuers cannot be ignored in the resolution process. It is true that CoC on any valid reason can take a call to ask for any fresh valuation due to any relevant circumstances, but the valuation done by the Registered Valuers and average of liquidation value taken up by the Valuers serves the specific purpose and cannot be allowed to be disregarded by the CoC. In event, it is accepted that the CoC can change the liquidation value on its own, that may lead to unsatisfactory results. We, thus, are of the view that liquidation value found by the Registered Valuers cannot be allowed to be changed by the CoC.

Liquidation value found by the Registered Valuers cannot be allowed to be changed by CoC – Kotak Mahindra Bank Limited Vs. RP of Universal Buildwell Pvt. Ltd. – NCLAT New Delhi Read Post »

Approval of Resolution Plan for Jaypee Infratech Ltd. – Mr. Anuj Jain Interim RP Jaypee Infratech Ltd. Vs. Suraksha Realty Ltd. – NCLT Special Bench

Summary of judgment of NCLT (total 365 pages judgment) in approval of Resolution Plan of Consortium of M/s. Suraksha Realty Limited and M/s. Lakshdeep Investments and Finance Private Limited for Jaypee Infratech Limited (JIL) (Corporate Debtor) is now available in IBC Laws database.
Following are silent points of the summary:
• (1) Whether a Secured Creditor is entitled to choose the security interest of its own choice for enforcing?
• (2) Whether dissenting secured creditors have right to recover cost of enforcing security interest in case of enforced security interest?
• (3) Whether a Secured Creditor can be treated as an Unsecured Creditor and will be entitled to both the benefits under Section 53(1)(b)(ii) and Section 53(1)(d) both simultaneously??
• (4) Whether YEIDA is Secured Creditors as per Rainbow Decision?
• (5) Whether a Resolution Plan would have given immunity to the personal guarantors from that debt?
• (6) Whether Personal Guarantor has right to subrogation?
• (7) Other such as termination of the maintenance agreement etc.
Further, the Successful Resolution Applicant (SRA)/Suraksha has sought for 38 “Reliefs and Concessions”, some are: (i) Legal proceedings relating to Income Tax, (ii) Waived all the procedural requirements in terms of Section 66, Section 42, Section 62, Section 71 of the CA, 2013 in relation to reduction of share capital of the Corporate Debtor, (iii) Waiver from payment of stamp duty (iv) Non-compliances of the Corporate Debtor or further claims of the Governmental Authorities, (iv) Regularization all the loan accounts of the Corporate Debtor (v) Withdraw all legal proceedings, (vi) Initiation of any investigations, actions or proceedings against the Corporate Debtor, (vi) Resolution Applicants reserve their right to institute any investigation pertaining to any transaction(s) carried out by the ex-management of the Corporate Debtor, (vii) Necessary permissions or approvals under the Banking Regulation Act 1949, (vii) claim set-off of the entire Minimum Alternate Tax (MAT) credit as available to the Corporate Debtor, against the normal income-tax (viii) Losses already lapsed/not lapsed as on the Approval Date should be allowed to be carried forward, (ix) Capital gains/business income to the Corporate Debtor, (x) past litigations pending (xi) Waived of penalty (xii) Removal of the existing auditors of the Corporate Debtor etc.

Approval of Resolution Plan for Jaypee Infratech Ltd. – Mr. Anuj Jain Interim RP Jaypee Infratech Ltd. Vs. Suraksha Realty Ltd. – NCLT Special Bench Read Post »

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