Ujaas Energy resolution back on track after NCLAT reverses NCLT order

The National Company Law Appellate Tribunal (NCLAT) in a recent verdict overturned a January 2023 order of NCLT, in which the adjudicating authority had rejected the resolution plan submitted by a consortium of SVA Family Welfare Trust and M&B Switchgears for Ujaas Energy Ltd.

The Indore Bench of the NCLT in its 6 January 2023 order had refused to approved the Rs 74.81 crore resolution plan submitted by SVA Family Welfare Trust on the ground that the plan contained a provision for extinguishment of personal guarantee of the personal guarantors given in favour of the Bank of Baroda.

The NCLT has said in its order that Bank of Baroda is fully entitled to proceed to realise its dues from the personal guarantors since the payment under the plan does not liquidate the dues of the Bank of Baroda. Bank of Baroda was the dissenting financial creditor with 5.83% voting share.

The NCLAT noted that all Financial Creditors has assented for relinquishment of such security except Bank of Baroda which had only 5.83% vote share.

It said that the decision of the CoC to accept the value for relinquishment of personal guarantee was a commercial decision of the CoC which cannot be allowed to be impugned at the instance of dissenting Financial Creditor.

“We are of the view that the Adjudicating Authority committed error in rejecting the application for approval of the resolution plan on the ground that plan could not have contained a provision for extinguishment of personal guarantee of the personal guarantors. Plan allocates a plan value for extinguishment of personal guarantee which has been accepted by the financial creditors by a vote share of 78.04%. We, thus, are of the view that the order of the Adjudicating Authority dated 6 January 2023 is unsustainable,” the NCLAT said in its order.

The appellate tribunal, therefore, directed the NCLT to proceed to pass a fresh order in the application praying for approval of the resolution plan for Ujaas Energy within a period of three months.

The Corporate Insolvency Resolution Process (CIRP) was initiated against Ujaas Energy Limited in September 2019. Ujaas Energy owed Rs 150 crore to its creditors. As per the resolution plan submitted by the consortium of SVA Family Welfare Trust and M&B Switchgears, secured financial creditors would get a sum of Rs 68.82 crore against their total admitted claims of Rs 144 crore.

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