NCLT Bench quashes 75 percent vote requirement
In a trend setting order, the bench here of the National Company Law Tribunal (NCLT) has struck down an attempt byagroup of banks to block an insolvency resolution plan by citing the 75 per cent vote share requirement prescribed under Section 30(4) of the Insolvency and Bankruptcy Code (IBC).
The bench of judicial member Rajeshwara Rao Vittanala and technical member Ravikumar Duraisamy approved a one time settlement (OTS) as agreed to by Kamineni Steel &Power,a Hyderabad based corporate debtor, as part of a resolution plan cleared by a group of creditors with 66.67 per cent voting power.
Speaking to Business Standard on the verdict,VK Sajith, an advocate for Indian Bank that had backed the resolution plan, with four other lenders, said the bench had gone beyond only the interests of corporate debtor and corporate creditors, as the plan involved possible rehabilitation of 450 workers.
Indian Overseas Bank, Central Bank of India and Bank of Maharashtra, with a combined 29.12 percent voting power, had resisted the resolution plan, citing the 75 per cent vote share clause.
The bench rejected this."The dissenting bankers appear to have been guided by 75 per cent as prescribed under Section 30(4), rather than any policy or Reserve Bank of India (RBI) guidelines in that regard. Section 30(4) merely states that the Resolution Plan may be approved byavote not less than 75 per cent of voting share of the financial creditors.
It did not say whether such percentage is out of the total voting share of the financial creditors or those present during meetings of the respective COC (committee of creditors) of financial creditors.Since the IBC isanew Code and still evolving, the above percentage has to be read with various circulars issued by RBI, regulator for the banking sector,” the bench said ina100page judgement.
The registry was told to sendacopy of the order to the RBI governor.The bench approved the OTS presented by the Resolution Professional, based on the consent of five financial institutions —Indian Bank, JM Financial Asset Reconstruction Company, Allahabad Bank, Andhra Bank and Oriental Bank of Commerce.
It did not say whether such percentage is out of the total voting share of the financial creditors or those present during meetings of the respective COC (committee of creditors) of financial creditors.Since the IBC isanew Code and still evolving, the above percentage has to be read with various circulars issued by RBI, regulator for the banking sector,” the bench said ina100page judgement.
The registry was told to sendacopy of the order to the RBI governor.The bench approved the OTS presented by the Resolution Professional, based on the consent of five financial institutions —Indian Bank, JM Financial Asset Reconstruction Company, Allahabad Bank, Andhra Bank and Oriental Bank of Commerce.
Kamineni had shut down the operations of its plant in Nalgonda district of Telangana, owing to financial and other difficulties.
The Business Standard, New Delhi, 7th December 2017
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