2025 (3) TMI 582 - HC - IBC

Consolidation of the Corporate Insolvency Resolution Process (CIRP) for KSK Mahanadi Private Limited KSK Water Infrastructures Private Limited and Raigarh Champa Rail Infrastructure Private Limited should be mandated by the court - HELD THAT - Admittedly the petitioner herein has not filed any appeal or sought for any direction either from the NCLT or NCALT. Since the petitioner has not filed any application either before the NCLT or NCALT it is not having any right to question the withdrawal of the appeal by the Financial Creditor. This Court deems it appropriate of this Writ Petition by relegating the petitioner to file an appropriate application on the file of the NCLT and raise all grounds available under law. Upon filling such application the NCLT is directed to examine the same and pass appropriate orders in accordance with law within a period of two weeks from the date of receipt of such application. Until such time the Resolution Process shall be deferred. Conclusion - The petitioner should file an application with the NCLT to address the consolidation of CIRP and the NCLT should decide on this within two weeks of receiving the application. Petition disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The primary legal issue considered was whether the consolidation of the Corporate Insolvency Resolution Process (CIRP) for KSK Mahanadi Private Limited, KSK Water Infrastructures Private Limited, and Raigarh Champa Rail Infrastructure Private Limited should be mandated by the court. Additionally, the court considered whether the actions of the committees of creditors and resolution professionals were in compliance with their fiduciary duties under the Insolvency and Bankruptcy Code (IBC). The court also examined whether a framework for group insolvencies should be developed to prevent similar issues in the future.

ISSUE-WISE DETAILED ANALYSIS

Consolidation of CIRP

- Relevant Legal Framework and Precedents: The court examined the provisions of the Insolvency and Bankruptcy Code (IBC) and the jurisdictional limits of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) concerning the consolidation of CIRP for different corporate debtors. The inherent jurisdiction as per Rule 11 of the NCLT Rules was also considered.

- Court's Interpretation and Reasoning: The court noted that the NCLT had previously rejected the application for consolidation, citing a potential chaotic situation that could arise from consolidating assets and liabilities of different companies. The NCLT suggested that the committees of creditors (CoC) could voluntarily sit together to find a common resolution applicant, but it could not mandate consolidation.

- Key Evidence and Findings: The court found that the financial creditor, Punjab National Bank (now Prudent ARC Limited), had filed an application for consolidation, which was rejected by the NCLT. The NCLAT appeal was withdrawn, and no further applications were filed by the petitioner.

- Application of Law to Facts: The court applied the legal framework to conclude that the petitioner had not taken the necessary legal steps to challenge the withdrawal of the appeal or to file an application for consolidation with the NCLT or NCLAT.

- Treatment of Competing Arguments: The court acknowledged the petitioner's concerns but emphasized the procedural requirements and the lack of action on the petitioner's part to pursue available legal remedies.

- Conclusions: The court concluded that the petitioner should file an appropriate application with the NCLT to seek relief and that the NCLT would then examine and decide on the matter within two weeks of receiving the application.

Fiduciary Duties and Development of Group Insolvency Framework

- Relevant Legal Framework and Precedents: The court considered the fiduciary duties imposed on the committees of creditors and resolution professionals under the IBC. It also touched upon the need for a potential framework for handling group insolvencies.

- Court's Interpretation and Reasoning: The court did not make a direct ruling on the fiduciary duties or the need for a group insolvency framework but acknowledged the petitioner's concerns. The court suggested that these issues could be raised in the appropriate forum.

- Key Evidence and Findings: The court noted the absence of any formal investigation or findings regarding the alleged failure of fiduciary duties by the committees of creditors.

- Application of Law to Facts: The court found that without a formal application or investigation, it could not make a determination on these issues within the writ petition.

- Treatment of Competing Arguments: The court recognized the petitioner's arguments but reiterated the necessity for procedural compliance and the appropriate forum for addressing these issues.

- Conclusions: The court deferred any decision on these matters, suggesting that the petitioner pursue them through proper legal channels.

SIGNIFICANT HOLDINGS

- The court held that the petitioner should file an application with the NCLT to address the consolidation of CIRP, and the NCLT should decide on this within two weeks of receiving the application. The court stated, "The petitioner is relegated to file an appropriate application in CP(IB) No.492/7/HDB/2019 on the file of the NCLT and raise all grounds available under law."

- The court emphasized the procedural requirements for challenging the withdrawal of the appeal and the necessity for the petitioner to take appropriate legal steps to seek relief.

- The court deferred any decision on the fiduciary duties and the development of a group insolvency framework, indicating that these issues should be raised in the appropriate forum.