India: Analysis Of First Resolution Plan Approved By NCLT And The Objection Raised By Creditor

Last Updated: 18 September 2017
Article by Manoj K. Singh

The National Company Law Tribunal, Hyderabad (hereinafter referred as "Adjudicating Authority"), after hearing to all the concerned parties on 23.01.20171 admitted the application filed by Synergies-Dooray Automative Limited (hereinafter referred as "Corporate Debtor") under section 10 of the Insolvency and Bankruptcy Code (hereinafter referred as "the Code") and had appointed Ms. Mamta Binani as an Interim Resolution Professional (hereinafter referred as "IRP"). Pursuant to the order of the Adjudicating Authority, the IRP issued the public announcement and invited claims from the creditors in order to constitute the Committee of Creditors. After collation of the claims, the first meeting of Committee of Creditor was called on 22.02.2017 in which the IRP was appointed as Resolution Professional (hereinafter referred as "RP"). Thereafter, list of the creditors was forwarded to the Adjudicating Authority reflecting the percentage of exposure and voting rights (as provided in the table below)

As per the requirement of section 25(2)(h) of the Code, the RP had initiated the process of inviting prospective Resolution Applicants for submission of Resolution Plans for the resolution of the Corporate Debtor. In the response, 4 participants applied for the offer document, out of which, only 3 entities sent the Resolution Plan namely, 1) SMB Ashes Industries; 2) Synergies Casting Limited (SCL); 3) Suiyas Industries Private Industries. The resolution plan of SCL was selected by a vote of 90.16% (majority) during the second meeting of Committee of Creditor. Thereinafter, the RP had submitted the Resolution Plan approved by Committee of Creditors for seeking approval from the Adjudicating Authority under section 30(6) of the Code.

The main features of the Resolution Plan which was submitted with the Adjudicating Authority were (i) the total recovery of INR 5,408.21 lakh by the Creditors and same be paid by way of long term funds and accruals (sum of investments or interests) of SCL over a time span of five years; (ii) A merger to take place between SDAL and SCL; (iii) the state government to exempt the stamp duty as applicable on the proposed merger; (iv) all the existing tax dues of Corporate Debtor were to be paid from the end of fifth year in which the payment of Creditors will be over and the said payment of existing dues will also be made in a time span of five years without any interest; and (v) The Resolution Applicant to finance any shortfalls in making timely payments to the tax authorities or any other debtors and to induce funds for all other obligations under the Resolution Plan.


EARC, one of the financial creditors holding 9.84% in voting share, had filed objection with respect to the incorrect admission of claims and constitution of invalid Committee of Creditor by IRP under section 60(5)(c) of the Code read with Rule 14 and 34 of the NCLT Rules 20162. The sub-section (5)(c) of Section 60 of the Code provides that the NCLT has jurisdiction to entertain or dispose of any application wherein "any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under the code". EARCL has made the following objections before the Adjudicating Authority:

  1. IRP has failed to consider that an Assignment Agreement which was entered into on 24 Nov. 2016 by which the existing debt of the Corporate Debtor has suspiciously changed hands from a related party of the Corporate Debtor being SCL to a third-party MFL and the same is invalid as it was entered into with the mala fide ulterior motive of reducing the voting rights of the Applicant in the meeting of the Committee of Creditor;
  2. EARC stated that under the Code a related party of a corporate debtor is not entitled to any participation or voting rights in meeting of the Committee of Creditors of a Corporate Debtor. SCL being a group company of the Corporate Debtor is a related party and therefore, cannot in any manner whatsoever be part of the Committee of Creditor of the Corporate Debtor;
  3. Further the debt assigned by SCL to MFL by the Assignment Agreement would also not be considered for the voting in the committee of Creditors.


The Adjudicating Authority looked into the objections raised by EARC and given the following observations with respect to it.

  1. The Adjudicating Authority said that by reading the provision of section 60(5)(c) of the Code, it is established beyond doubt that the said Section empowers this NCLT to determine question of priorities or question of law or facts arising out of or in relation to the insolvency resolution of the Corporate Debtor;
  2. The Adjudicating Authority observed that question of priorities or question of law or facts as amenable to the jurisdiction of this Tribunal can only be in terms of the existing debts or liabilities of the Corporate Debtor. The aspect of inter-se transfer between the Financial Creditors of the Corporate Debtor cannot fall within the purview of the jurisdiction of the Tribunal. Therefore, the Tribunal cannot adjudicate on the aspect of validity of the Assignment Agreement between SCL and MFL;
  3. The Tribunal also observed that by reading section 5(24) of the Code, MFL does not fall into any of the conditions which makes an entity a related party of the Corporate Debtor and trigger the applicability of the said section. Further, it is evident that SCL as a part of its commercial decision assigned its dues to MFL and MFL also as a part of its business decision as a Non Banking Financing Company acquired the debts from SCL. Therefore there is no relation between SCL and MFL;
  4. The Tribunal, in the passing reference also said that with regard to the intention of the Corporate Debtor and SCL, the proceeding before the Tribunal under the Code is summary proceedings and therefore, mens rea cannot be raised before the Tribunal.


The Adjudicating Authority approved the resolution plan under section 31(1) after scrutinizing the said resolution under the requirement mentioned under section 30(2) of the Code. It is to be noted that Section 30(2) of the Code makes it obligatory on the part of the Resolution Professional that the Resolution plan confirm the various requisites as provided under various sub-clauses of Section 30(2) of the Code. Though the Resolution Plan is approved, it is pertinent to mention that the amount proposed to be recovered through the resolution plan is only 54.04 cr. (w.r.t Creditors) whereas the total debt shown in the application which was presented by the Corporate Debtor before the Adjudicating Authority under Section 10 of the Code was to the tune of INR 971.25 cr (which includes interest also). The Adjudicating Authority has approved approximate haircut of 94%, which might set the bar of recovery too low.

Here, it would be worth mentioning that the main reason for the approval of the Resolution Plan by the Committee of Creditors at first instance was the voting right of MFL as financial creditor in the Committee of Creditors. MFL was holding 76.33% share in the voting and the as the Hon'ble Adjudicating Authority rightly observed while deciding CA. No. 57 of 2017 IN CP (IB) No. 01/HDB/2017 that the assignment of debt by SCL to MFL just before the enactment of Code is similar to "Tax Planning" as because of this assignment deed, the share of all the financial creditors were reduced and the resolution plan was approved smoothly.


1 C.A. No. 123/2017 in CP(IB) No.01/HDB/2017

2 CA No. 43 of 2017 in CP No. 01/IBC/HDB/2017

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.