The National Company Law Appellate Tribunal (NCLAT) upheld an NCLT decision setting a precedent and paving the way for progress on the resolution of the Dunar Foods insolvency proceedings. JSA acted as the legal adviser to the lead creditor, State Bank of India (SBI).
The National Company Law Tribunal (NCLT) had ordered the resolution applicant to pay interest at 12% per annum on the total amount owed for the delay in the implementation of a resolution plan for the Haryana-based basmati rice exporter Dunar Foods.
“One of the biggest challenges faced was that there was no precedent on the issue of granting of interest for a delay in plan implementation by the resolution applicant. Therefore, our submissions were merely based on the merits of the present case and the intent of the legislature. Fortunately, the NCLAT upheld the true intent of the IBC and set a precedent on this issue,” JSA partner Varghese Thomas told India Business Law Journal.
JSA’s transaction team was steered by leading partner Thomas, partner Fatema Kachwalla and senior associate Vishrutyi Sahni.
The resolution applicant had challenged the NCLT order before the NCLAT, where the latter upheld the payment of interest for the delayed period from 27 January 2020 to 15 November 2021.
The SBI, which represented the committee of creditors (CoC), is the lead claimant among the financial creditors who are owed a total of INR9.7 billion (USD124 million) after Dunar Foods filed for corporate insolvency proceedings in December 2017. The SBI is owed INR7.8 billion.
“It was the need of the hour to protect the financial creditors most of which are public financial institutions, which are already taking a considerable haircut under the Insolvency and Bankruptcy Code [IBC] from the burden of any further delay in recovering its amount due at the hands of the resolution applicant,” said Thomas.
The tribunal order added that the resolution applicant is to start with a fresh slate, and directed the resolution professional and the CoC representative to assist the resolution applicant to sort out its issues pending before various forums.
Thomas added: “This judgment is an extension of the ruling of the Supreme Court in the Ebix Singapore v Committee of Creditors of Educomp Solutions where the resolution applicant is not permitted to withdraw or seek modification of the resolution plan. Therefore, any kind of delay in implementation should also have monetary consequences.”
The NCLAT also passed an order stating that the “resolution applicant cannot suddenly be faced with undecided claims”, with regards to the transfer of assets free of encumbrances.
“After the resolution plan is approved, it is the responsibility of the resolution professional to compile the claims submitted to him or observed from record and put the same in the information memorandum so that the prospective resolution applicant has a full idea of its own liability,” the tribunal’s order stated.