26 February 2019: The National Company Law Appellate Tribunal has stayed the ongoing liquidation of Bharati Defence and Infrastructure Ltd.
The NCLAT directed that the liquidator will not take any steps to sell or transfer or alienate movable or immovable assets of the company. The Mumbai bench of the National Company Law Tribunal had ordered the liquidation in January, rejecting the Edelweiss Asset Reconstruction Company’s resolution plan approved by the committee of creditors.
Edelweiss ARC, which initiated the insolvency process against Bharati Defence in June 2017, was the lead financial creditor and also the successful bidder. The resolution professional had rejected the other four offers citing non-compliance.
But the NCLT rejected Edelweiss ARC’s plan on the grounds that it did not envisage infusion of fresh funds, provided for payment to operational creditors only in a phased manner, did not allocate any amount towards statutory dues, and extinguished employees and workmen rights.
The NCLT also concluded that the resolution professional and the CoC failed to ensure appropriate checks and balances and didn’t implement the ‘Chinese wall’ concept during the insolvency process. Since EY had advised Edelweiss ARC and provided investment banking services to the CoC, it created a conflict of interest, the NCLT had noted. The tribunal had also taken adverse note of the payment of Rs 4.27 crore to the resolution professional and his team, saying there was no transparency in the fees paid to them.
The resolution professional appealed against the adverse observations in the NCLAT. While the appeal was limited to this aspect, the NCLAT framed another question: whether the NCLT can sit in appeal over the decision of the CoC on viability, feasibility and finance matrix of the resolution plan, and if it is as per the provisions of the Insolvency and Bankruptcy Code, and not discriminatory?
The NCLAT has directed that Edelweiss ARC be added to the case. It will hear the matter on March 29.