NCLAT Orders Fresh Review Of Eagle Fashions' Proposal For Sumeet Industries

The National Company Law Appellate Tribunal has set aside an NCLT order and directed it to consider afresh bid of Eagle Fashions for debt-ridden Sumeet Industries.

On April 5, 2024, the Ahmedabad bench of NCLT had rejected the application filed by RP of Sumeet Industries, seeking approval of the bid of Eagle Fashions, which was selected by the Committee of Creditors with 74 per cent votes.

The NCLT order was challenged by the Resolution Professional and Eagle Fashions by filing two petitions before appellate tribunal NCLAT.

Setting aside the NCLT order, a three-member bench directed the RP of Sumeet Industries to file the minutes and the documents of the meeting which were not provided earlier.

Following the appellate tribunal's order, the National Company Law Tribunal will have to consider afresh the approval of the resolution plan of Eagle Fashions relating to debt-ridden Sumeet Industries.

“We are of the view that Minutes and the Documents which have not been filed by RP… may be submitted along with an Additional Affidavit before the NCLT within two weeks from today.

“Adjudicating Authority (NCLT ) after receipt of the documents and Minutes as noted by the Adjudicating Authority in the impugned order may proceed to consider afresh and decide the same in accordance with law,” it said.

Corporate insolvency resolution proceedings against the Surat-based firm engaged in the business of manufacturing and exporting polyester yarns, was started on Dec. 20, 2022.

Eagle Fashions’ resolution plan was approved by 74.9% voting shares of the Committee of Creditors and based on that, a Letter of Intent was issued on Nov. 20, 2023, by the RP to Eagle Fashions, which unconditionally accepted it.

NCLT while rejecting the resolution plan, had observed that RP had not submitted a copy of the Information Memorandum, request for resolution plan, Valuation Report, receipt of Performance Security and Minutes of the Meeting of the CoC.

Challenging this in NCLAT, RP had contended that NCLT should have allowed producing these necessary documents. Rejection on the ground that RP has not submitted the documents was not appropriate.

On this, the appellate tribunal said NCLT can reject the Resolution Plan only when it is in non-compliance with Section 30(2) of the Insolvency & Bankruptcy Code.

However, it also said:'From the observations made by the NCLT in the impugned order, it is clear that apart from only bare observation that Plan does not confirm to Section 30(2), there are no reasons or material given as to how the plan can be said to be non-compliance of Section 30(2).”

It is always open for NCLT to call for the relevant documents from the RP for examination of the same and rejection of the plan on the ground that RP has not filed Information Memorandum, RFRP and certain Minutes of the CoC is “clearly uncalled” for.

“We allow both the appeals, set aside the impugned order dated April 5, 2024, passed by the NCLT and revive the (application)...before the NCLT for fresh consideration in accordance with law,” it said.