MODIFICATION / REVIEW OF IBC RESOLUTION PLAN

[Dr. Sanjiv Agarwal]

Section 31 of Insolvency and Bankruptcy Code, 2016 (in short, IBC) contains statutory provisions for approval of resolution plan by the adjudicating authority and its consequences. Also, section 60 of IBC stipulates as to who shall be the Adjudicating Authority for Corporate Persons, which is National Company Law Tribunal (NCLT). Accordingly, the following statutory provisions exist on the statute book:

Approval of Resolution Plan (Section 31 of IBC)

(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, 3[including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan.

However, the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.

(2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan.

(3) After the order of approval under sub-section (1),-

1. the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and
2. the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database.

(4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later:

Provided that where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.

Adjudicating Authority for Corporate Persons (Section 60 of IBC)

(1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located.

(2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate debtor shall be filed before such National Company Law Tribunal.

(3) An insolvency resolution process or liquidation or bankruptcy proceeding of a corporate guarantor or personal guarantor, as the case may be, of the corporate debtor pending in any court or tribunal shall stand transferred to the Adjudicating Authority dealing with insolvency resolution process or liquidation proceeding of such corporate debtor.

(4) The National Company Law Tribunal shall be vested with all the powers of the Debt Recovery Tribunal as contemplated under Part III of the Code for the purpose of sub-section (2).

(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of-

1. any application or proceeding by or against the corporate debtor or corporate person;
2. any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and
3. any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code.

(6) Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded.

Apex Court’s View

In one of the recent judgments, in SREI MULTIPLE ASSET INVESTMENT TRUST VISION INDIA FUND VERSUS DECCAN CHRONICLE MARKETEERS & OTHERS - 2023 (3) TMI 897 - SUPREME COURT, on an appeal arising from NCLAT, New Delhi order in MS. MAMTA BINANI DECCAN CHRONICLE HOLDINGS LIMITED, CANARA BANK VERSUS DECCAN CHRONICLE HOLDINGS LIMITED - 2019 (6) TMI 1660 - NATIONAL COMPANY LAW TRIBUNAL HYDERABAD, Supreme Court of India held that once resolution plan stands approved, no alterations / modifications are permissible. The resolution plan is either to be approved or disapproved, but any modification after approval of resolution plan by Committee of Creditors (CoC), based on its commercial wisdom, is not open for judicial review unless it is found to be not in conformity with mandate of IBC.

On facts, the CIRP was initiated against the corporate debtor by the NCLT and, the Resolution Professional (RP) was appointed. The RP collated the received claims and, the resolution plan submitted by the appellant – successful resolution applicant (SRA) was approved by the CoC with 81.39 percent voting share, the RP filed an application before the NCLT seeking rights over the trademark of corporate debtor.

The NCLT approved the said resolution plan subject to condition in reference to the rights over the brand name / trademarks of the corporate debtor, the NCLT later decided the application with a direction that the RP has established that it was the corporate debtor, who had an exclusive right to use the trademarks Deccan Chronicle and Andhra Bhoomi and also made a declaration that the trademarks Deccan Chronicle and Andhra Bhoomi belonged to the corporate debtor.

The NCLAT in its order set aside NCLT’s order on ground that the order made by the NCLT holding that the ownership rights of the corporate debtor over the trademarks resulted into a modification / alteration of the approved resolution plan by CoC, which was impermissible in law and not is terms of section 60(5).

In the instant appeal, Apex Court observed that the NCLAT returned a finding that the ownership of the Corporate Debtor declared over the trademark after the approval of the Resolution Plan by the CoC, would amount to modification/alteration of the approved Resolution Plan by CoC which is impermissible in law and is not in terms of Section 60(5) of IBC. Once the Resolution Plan stands approved, no alterations/modifications are permissible. It is either to be approved or disapproved, but any modification after approval of the Resolution Plan by the CoC, based on its commercial wisdom, is not open for judicial review unless it is found to be not in conformity with the mandate of the IBC.

It was held that in terms of the approved Resolution Plan, it was the perpetual exclusive right to use the brands, namely, “Deccan Chronicle” and “Andhra Bhoomi”, by the Corporate Debtor which were available to SRA i.e. the appellant herein and once it has been approved by the adjudicating authority, certainly the right to exclusive use of the trademarks belonging to the Corporate Debtor, on being approved by the adjudicating authority, is always available to the SRA i.e. the appellant, but not the ownership rights of the trademarks of the Corporate Debtor.

Further, declaration by NCLT that trademark belonged to corporate debtor amounted to modifications/alteration of approved resolution plan, which was impermissible in law and was not in terms of section 60(5).

The appeal was accordingly dismissed.