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Daily Category  (Infrastructure)

NCLAT underlines IBC terms-can’t accept offer if it comes late

CONTEXT:

The National Company Law Appellate Tribunal (NCLAT) has ruled that the National Company Law Tribunal (NCLT) cannot accept a revised offer from a bidder who enters the fray late even if the offer is higher than that of other bidders that have adhered to the bidding timeline.

                                                 Read all Latest Updates on and about NCLAT

BACKGROUND:

The issue of revised offers after the deadline for submission of bids has crossed has seen many prolonged legal battles, including

  • Case of Dewan Housing and Finance Limited (DHFL) and
  • Case of Binani Cement

NEWS IN DETAILS:

Power to adjudicate: The judgment, delivered on January 11 has held that the only power the NCLT has is:

  • To adjudicate whether the bids that were placed in time and approved by the Committee of Creditors (CoC) of the corporate debtors stand the test of the rules of plan approval under the Insolvency and Bankruptcy Code (IBC).

Corporate Insolvency Resolution Process (CIRP): NCLAT said that When the application for approval of resolution plan is pending before the adjudicating authority,

  • At that time the adjudicating authority cannot entertain an application of a person who has not participated in CIRP (Corporate Insolvency Resolution Process)
  • Even when such person is ready to pay more amount in comparison to the successful resolution applicant.”

LIMITING ROLE OF THE TRIBUNAL:

Maximisation of value of assets by IBC: While IBC provides for the idea of maximisation of value of assets of a corporate debtor, it says all bids must be in by deadline.

Limited role as Tester only: The NCLAT has limited the role of the tribunal to testing whether bids submitted within time stand the test of approval under the IBC.

DIFFERENT INSOLVENCY CASES:

1. DHFL insolvency case:

  • Bidders such as the Adani Group, initially submitted a smaller bid with an intent to buy only the few units of the NBFC, later revised its stance, offering a total of Rs 30,000 crore, plus Rs 3000 crore in interest, for entire DHFL loan book.
  • Rival bidders such as the Piramal Group  alleged that the Adani Group was late in submitting the bids.
  • The Adani Group said that its only intent was to
    • Provide an unconditional offer and
    • Potential value maximisation for all the stakeholders”.

2. Case of Binani Cement

  • NCLT had asked UltraTech Cements to revise its bid and extended the deadline for three days.
  • This, too, had not gone down well with other bidders such as the Dalmia Group, which had submitted their bids in time.

3. Case of Bindals Sponnge Industries insolvency:

  • During the insolvency process of Bindals Sponnge Industries, the NCLAT flayed the idea of bidders coming late under the pretext of maximisation of value of assets of a corporate debtor.

NCLAT JUDGEMENT:

  • NCLAT said that if this process was allowed, the NCLT would always have to direct the CoC to consider the plan which is the highest, even if it was not within the stipulated timeline.
  • “Once the resolution plan has been opened and fundamentals and financials of the plan and offer made therein were disclosed to all the participants including RP.
  • Then anyone can enhance its offer before the adjudicating authority in the guise of maximization of realisation.
  • Therefore, no further fresh bid or offer could have been accepted,” the NCLAT said in its judgment.

DIFFERENCE BETWEEN NCLT AND NCLAT

Though NCLT and NCLAT were established by the virtue of same Companies Act but there is some difference between them which is explained in the following table:

NCLT NCLAT
Established as per Section 408 of Companies Act, 2013. Established as per Section 410 of Companies Act, 2013.
Original Jurisdiction. Appellate Jurisdiction
Cases can come to NCLT directly. No case can come to NCLAT directly
  NCLAT has replaced the Competition Appellate Tribunal. (“COMPAT”)
NCLT has 16 benches throughout India. NCLAT has two benches throughout India one at New Delhi and another at Chennai.

 

National Company Law Appellate Tribunal (NCLAT)

It is a Statutory and Quasi-Judicial body.

It was constituted under Section 410 of the Companies Act, 2013.

Appellate body: It hears appeals against

1. Orders of National Company Law Tribunal Under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC).
2. Orders passed by Insolvency and Bankruptcy Board of India Under Section 410 of Companies Act, 2013
3. Order passed by the Competition Commission of India (CCI). Under Section 410 of Companies Act, 2013

Appeal to SC: Any person aggrieved by any order of the NCLAT may file an appeal to the Supreme Court.

Composition:  The President of the Tribunal and the chairperson and Judicial Members of the Appellate Tribunal shall be appointed after consultation with the Chief Justice of India.

Selection Committee: The Members of the Tribunal and the Technical Members of the Appellate Tribunal shall be appointed on the recommendation of a Selection Committee (5 Members) consisting of:

  1. Chief Justice of India or his nominee—Chairperson.
  2. A senior Judge of the Supreme Court or a Chief Justice of High Court— Member.
  3. Secretary in the Ministry of Corporate Affairs—Member.
  4. Secretary in the Ministry of Law and Justice—Member.
  5. Secretary in the Department of Financial Services in the Ministry of Finance— Member.

Term: Term of office of chairperson and members is 5 years and

Reappointment: they can be reappointed for additional 5 years.

Source: Indian Express

India’s energy growth story will be driven by renewable energy-Amitabh Kant

CONTEXT:

Emphasising on zero carbon emissions to get rid of pollution in cities, Amitabh Kant, CEO, NITI Ayog, on Monday said India’s energy growth story will be driven by renewable energy in the coming future.

Kant said this during the virtual launch of the Tata Motors and Pune-based Repos Energy Startup Summit 2021 on Monday.