An appellate tribunal has stayed the order of the National Company Law Tribunal (NCLT) allowing the promoter of MBL Infrastructure to bid for his insolvent company. It also stayed the resolution plan for the company. The Kolkata bench of the NCLT had allowed the promoter of MBL Infrastructure, Anjanee Kumar Lakhotia, to place a resolution plan for the company. Lakhotia is also a corporate guarantor for MBL Infrastructure. The NCLT had said that his guarantee had not been invoked and hence Lakhotia was eligible to bid. Punjab National Bank (PNB), one of the creditors to MBL Infrastructure, had appealed against the NCLT order. The bank contended that even though the corporate guarantee had not been invoked, Lakhotia was the promoter of MBL Infrastructure.
The Kolkata bench of the National Company Law Appellate Tribunal issued an interim order stating that the final resolution plan for MBL Infrastructure would not be approved till it made its final ruling.
“Merely because there is a default by a borrower in repayment of a borrowed amount to a creditor does not render the borrower or its guarantor dishonest. Every act of default cannot be equated with malfeasance,” the Kolkata bench of the NCLT had stated.
The NCLT had ruled that the Ordinance barring promoters of companies whose debts were overdue by a year from bidding for these companies in insolvency proceedings could not be applicable to all promoters. It observed that the guarantor whose guarantee had not been invoked could not be clubbed with those prohibited from bidding.
The NCLT ruled that the Ordinance about the Insolvency and Bankruptcy Code (IBC) did not bar every promoter and guarantor from bidding for insolvent companies.
The order will have repercussions on ongoing cases where promoters and guarantors have bid for companies undergoing insolvency resolution. The promoters of Essar Steel and Bhushan Steel have shown an interest in bidding for their companies.
Lakhotia’s resolution plan for MBL Infrastructure was found to be in compliance with the rules under the IBC by the resolution professional. However, the government had by then amended the IBC through an Ordinance barring promoters of companies with non-performing assets of more than one year, wilful and dubious defaulters or those associated with them from bidding for the insolvent companies. After the Ordinance, the committee of creditors found that Lakhotia was not eligible to bid for MBL Infrastructure. Lakhotia contended the decision by the committee did not reflect the correct interpretation of the Ordinance. He said he could not be barred from bidding as one year had not lapsed from the date MBL Infrastructure’s dues were declared NPAs. He also said that the creditors did not invoke the guarantee executed by him nor was any demand made by the lenders to make any payments as a guarantor.
Members of the committee of committee were not clear about the implications of various clauses of the Ordinance and sought an interpretation by the appellate tribunal in this case.
SOURCE: Business Standard