NCLAT rejects ex-promoter’s appeal against resolution order of Empee Distilleries

The National Company Law Appellate Tribunal (NCLAT) has rejected an appeal against the National Company Law Tribunal’s (NCLT’s) nod to the resolution plan of corporate debtor Empee Distilleries Limited. A petition against the NCLT decision was filed by former promoter of Empee Distilleries Shaji Purushothaman.

Rejecting the petition, the NCLAT said in its order that the commercial wisdom of the Committee of Creditors in regard to viability and feasibility of the Resolution Plan is final and this Appellate Tribunal cannot substitute its view for the commercial wisdom of the Committee of Creditors.

The three-member bench of the appellate tribunal also noted in its order: “It is not disputed that the successful resolution plan, apart from disclosing the source of funds in the form of infusion by the resolution applicant and receivables from the government has passed the muster before the Committee of Creditors and has been found better than the settlement plan offered by the appellant/ promoter which was found lacking on many material aspects.”

The appellant had moved NCLAT after NCLT gave prominence to the resolution plan submitted by successful resolution applicant SNJ Distilleries Limited over its own settlement plan under Section 12A of IBC.

The Appellant had contended that its settlement plan, in terms of liberty granted by this Appellate Tribunal and subsequently confirmed by the Supreme has not been considered by the Adjudicating Authority (NCLT) in terms of the liberty granted which envisaged substantial consideration of the Settlement Plan and its comparison with the approved Resolution Plan. The former promoter also argued that the NCLT had dismissed the Appellant’s application on procedural non-compliance which could not be attributed to him.

The promoter, who was represented by Kapil Sibal, also contended that the settlement plan of Rs 513 Crores is better than Resolution Plan of Rs 475 crore.

Dismissing all the arguments, the NCLAT argued that settlement plan by the promoter was rejected because of the structure of the Settlement Plan and procedural non-compliance. “What primarily appears to have weighed with the Committee of Creditors in discarding the Settlement Plan of Promoter is its structural layout, inability of the promoter to satisfy the Committee of Creditors regarding generation of funds/mobilisation of resources and specific and clear cut debt/claim satisfaction mechanism. Ambiguity in regard to generation /raising of funds for translating the Settlement Plan into action as also in regard to specific schedule of payment to various stakeholders being writ large on the face of the proposed Settlement Plan.”

The resolution plan submitted by SNJ Distilleries Limited was approved by NCLT on 20 January 2020. The resolution plan included a total payment of Rs 475 crore – Rs 303 crore towards payment of secured and unsecured financial creditors, 127 crore towards statutory dues and around Rs 30 crore towards operational creditors other than employees and workmen.

The respondents – the resolution professional, SNJ Distilleries, Edelweiss ARC, IDBI Trusteeship, Union Bank of India, Andhra Bank, etc – were represented by Abhishek Manu Singhvi