Suraksha ARC withdraws ‘approved’ resolution plan due to delay in legal processes
Suraksha Asset Reconstruction Ltd (Suraksha ARC), an asset reconstruction company, has withdrawn its resolution application for corporate debtor Wind World (India) Ltd citing delays due to unending litigation in the case.
In a plea made by Suraksha ARC in the National Company Law Tribunal (NCLT) seeking withdrawal of its resolution plan, the resolution applicant contented that its plan was approved by the Committee of Creditors (CoC) for the first time on 17 November 2018 by 69.87% votes, and more than 600 days have been elapsed since then without the adjudicating authority – NCLT—approving the plan.
It contended in its plea to NCLT that the due to delays the business of the corporate debtor has further deteriorated, it has lost contracts and has affected the vision of the resolution plan. Therefore, it requested the NCLT to withdraw its resolution plan, approved first on 18 November 2018 and again after modification on 23 December 2019 (by a vote share of 93.63%).
The corporate insolvency resolution process (CIRP) against Wind World (India) Ltd was initiated by IDBI Bank on 20 February 2018. However, the case has been marred by several petitions against the resolution plan filed in NCLT, High Court and Supreme Court by operational creditors, promoters, etc.
The resolution applicant — Suraksha ARC — contended that a lot of time was consumed in petitions filed against the resolution process as well as the resolution plan. It cited one petition filed by an operational creditor – Sonu Cargo Movers Ltd – in Gujarat High Court. The petition was rejected by the High Court, after which the petitioner moved to Supreme Court.
Supreme Court then asked the NCLT to hear his pleading. The counsels of Suraksha ARC further said that the earlier mentioned operational creditor continue to file petitions, and they do not foresee a complete closure of litigations for next two years.
The resolution applicant also cited the amended Section 12 of the IBC, wherein it is said that the maximum time taken in the resolution should be 330 days including the period of litigations. It said that the present case had exhausted that time limit and hence it be allowed to withdraw its resolution plan.
The counsel for resolution professional, however, opposed the petition saying that timelines in the law are indicative and not mandatory in cases like this. It also argued that the IBC does not allow withdrawal of resolution plan, and that if allowing to withdraw the said plan will set a bad precedence.
However, the Ahmadabad bench of the NCLT noted that though the IBC law in stacked in favour of the CoC – CoC can reject a resolution plan at any stage even after approval but resolution applicant cannot withdraw its plan – it cannot be said that by submitting a resolution plan it has the resolution applicant has committed any crime.
It also rejected the CoC/resolution professional’s contention that withdrawal of the resolution plan would cause loss to financial creditors and other stakeholders.
The NCLT finally allowed Suraksha ARC to withdraw the resolution plan and asked the resolution professional to invite other resolution applicants within 15 days and finalise the resolution in the next 75 days. If not, then liquidate the company.
Wind World (India) owed Rs 4,710 crore to 17 of its financial creditors. According to the resolution plan, the financial creditors had to take a hair-cut of 80%.
