NCLT approves Ebix’s Rs 325-crore resolution plan for Educomp Solutions
The New Delhi bench of the NCLT has approved the Rs 325-crore resolution plan submitted by Ebix Singapore Pte. Ltd for Educomp Solutions Limited. The NCLT in its order said that Ebix will furnish performance bank guarantee of Rs.32.5 crore for implementation of the plan and implement the resolution plan of Educomp Solutions in letter and spirit, with due deference to all the terms and conditions thereof.
The resolution plan has a proposal for distribution of Rs 325 crore among creditors of Educomp against their total admitted claims of Rs 3,008 crore. Of the Rs 325 crore, financial creditors receive Rs 314 crore out of their total admitted claims of Rs 3,003 crore. The resolution plan also has a provision of making payment of Rs 6.8 crore to non-promoter shareholders.
A reluctant ‘successful’ resolution applicant
With the latest NCLT order approving Ebix’s resolution plan, it is expected that the corporate insolvency resolution process (CIRP) of Educomp finally sees a closure after six years of its initiation.
On 5 May 2017, Educomp filed a petition under Section 10 of the IBC seeking to initiate voluntary CIRP. The NCLT admitted this petition on 30 May 2017.
Ebix Singapore, which emerged as the successful resolution applicant by February 2018 after the lenders approved its resolution plan by 75.35%. However, things went into a tailspin for the CIRP process after the Ministry of Corporate Affairs in August 2018 instituted investigation against Educomp Solutions for financial fraud committed between 2014-18.
Ebix filed three applications for withdrawal of resolution plan – two of which were rejected by NCLT saying that once the CoC has approved the resolution plan, it becomes binding.
On the third instance NCLT allowed the withdrawal application noting that under the provisions of Section 31 of the Code, a Resolution Plan becomes binding only after acceptance of a plan by the Adjudicating Authority.
The NCLT also noted that an unwilling and reluctant resolution applicant, who has withdrawn his resolution plan, neither can put the corporate debtor back to its feet nor the effective implementation of its resolution plan can be ensured.
The NCLT’s order allowing application for withdrawal of resolution plan was challenged in National Company Law Appellate Tribunal (NCLAT), which on 29th July 2020 set aside the NCLT order. The matter was taken to Supreme Court, where the court said passed an order against allowing withdrawal of resolution plan.
The apex court noted: “The language of Section 31(1) cannot be construed to mean that a Resolution Plan is indeterminate or open to withdrawal or modification until it is approved by the Adjudicating Authority or that it is not binding between the CoC and the Successful Resolution Applicant.
The Supreme Court viewed that the binding nature between the CoC and the Successful Resolution Applicant of the Resolution Plan submitted for approval by the Adjudicating Authority is further evidenced from the fact that the CoC issued a LOI to the Successful Resolution Applicant stating that it has been selected as the Successful Resolution Applicant and its plan would be submitted to the Adjudicating Authority for its approval. The Successful Resolution Applicant is typically required to accept the LOI unconditionally and submit a Performance Bank Guarantee (PBG).
Also Read: Parmjit Gandhi completes acquisition of Educomp subsidiary
