2019: Many judgements passed by NCLAT failed SC perusal

Whos who of the corporate world - from Reliance to Tatas to ArcelorMittal - were in corporate law court but what took the cake was the NCLAT order reinstating the ousted Tata Sons head Cyrus Mistry as it shocked as well as shook the entire business world.

Though the National Company Law Appellate Tribunal (NCLAT) passed several orders/judgments in the insolvency and corporate matters in 2019 which include Tata-Mistry feud, Essar Steel, Jet Airways, IL&FS, Jaypee Infratech, and Reliance Communications, several of them failed to pass the scrutiny of the Supreme Court and were either set aside or modified.

While for 2020, NCLAT’s calendar is marked with several important matters and would start the year with the government-controlled Registrar of Companies (RoC) plea to modify the order passed by it in the Tata-Mistry case, in which it had directed to change the status of Tata Sons from a private company to a public company, the holding firm of USD 110 billion empire.

Besides, judgments are also expected from the appellate tribunal on other important matters which include the insolvency of Bhushan Power & Steel Ltd in which JSW has challenged attachment of assets by the ED; resolution of IL&FS group which has an outstanding debt of over Rs 90,000 crore; and McDonald’s-Bakshi matter, where state-run HUDCO is opposing settlement offer by US-based QSR major.

In the Essar Steel insolvency matter, the NCLAT in July this year while giving a final go ahead to the global steel giant ArcelorMittal for Rs 42,000 crore takeover of Ruia’s firm had put all the operational creditors of the company almost at par with the secured financial creditors over the disbursement of funds.

It had shaken the banking world as the appellate tribunal had altered the plan voted by Essar Steel’s lenders and approved by NCLT Ahmedabad and was challenged before the Supreme Court.

The apex court on November 15, not only upheld the primacy of financial creditors in the distribution of funds received under the corporate insolvency scheme but also ruled that the CoC would have a final say in the resolution plans under the Insolvency and Bankruptcy Code (IBC).

In August, the NCLAT ordered for liquidation of auto component maker Amtek Auto declining its lenders plea for extension of the insolvency resolution process deadline.

This was challenged by the lenders before the Supreme Court, which last month directed the resolution professional to invite fresh bids for the auto component maker within 30 days.

In another case, the NCLAT in November rejected the bid of Dhanuka Laboratories for Orchid Pharma and set aside the approval granted by the Chennai-bench of the NCLT.

The NCLAT observed that the approved resolution value, which stood at Rs 1,146.04 crore, proposed by Dhanuka Laboratories was lower than the liquidation value of Rs 1,309 crore of the company. This was challenged by the CoC before the Supreme Court which granted a stay on the order last month.

In July, the NCLAT permitted fresh bidding for the debt-laden Jaypee Infratech and extended the resolution period for another 90 days. However, in November the apex court annulled the order and allowed only two revised resolution plans from NBCC (India) Ltd and Suraksha Realty for voting.

The apex court had directed to complete the resolution process of Jaypee Infratech, which is developing about 32,000 flats, in which it has delivered 9,500 units, in 90 days.

The NCLAT order of January last directing initiation of insolvency proceedings against investment firm La-Fin Financial Services over the plea of IL&FS Financial Services had similar outcome at the apex court. The order was set aside by the Supreme Court which held that IL&FS Financial Services plea was beyond the period of three-years mentioned in Article 137 of the Limitation Act, and thus is time-barred and cannot be proceeded further.

In 2019, some of the NCLAT orders also raised eyebrows. The order in case of Sterling Biotech was such a case. The appellate tribunal not only stayed the liquidation of the company but also directed to hand over the management to its promoters, including absconding Nitin Jayantilal Sandesara and Chetankumar Jayantilal Sandesara.

The NCLAT also said that the Enforcement Directorate will probe and ascertain whether the money paid by the absconding promoters is not from the proceeds of crime.

NCLAT Chairman Justice S J Mukhopadhaya, who is going to hang his boots in March 2020 is also expected to pass the final judgment on fair trade regulator CCI's nod to Walmart's USD 16-billion acquisition of Flipkart.

The appellate tribunal had reserved its order in January last over the plea filed by trade association CAIT challenging approval by the Competition Commission of India (CCI).

In October, the NCLAT gave its go-ahead to NCLT Mumbai to decide on Adani Ports and SEZ Ltd's bid for Dighi Port, however, it said that the outcome would be subject to its final order.

In the same month, the appellate tribunal also rejected the oil ministry's plea seeking USD 314 million (around Rs 2,245 crore) from insolvency-bound Videocon Industries in unpaid profit petroleum from the Ravva oil and gas fields in the eastern offshore.