The insolvency appellate tribunal NCLAT on Wednesday said its jurisdiction along with NCLT under the framework of the Insolvency & Bankruptcy Code (IBC) needs to be examined as per the remarks passed by the Supreme Court in a case in 2021. “At this juncture, the jurisdiction of NCLT & NCLAT in the framework of IBC needs to be examined on the touchstone of the ratio of the Supreme Court in Arun Kumar Jagatramka’ Vs. Jindal Steel and Power Ltd’… ” said a two-member NCLAT bench.
The Supreme Court in 2021 in the matter of Arun Kumar Jagatramka Vs Jindal Steel & Power had offered a note of caution for NCLT and NCLAT, functioning as the adjudicatory authority and appellate authority under the IBC respectively, from judicially interfering in the framework envisaged under the IBC. The apex court had said IBC was introduced in order to overhaul the insolvency and bankruptcy regime in India.
As such, it is a carefully considered and well-thought-out piece of legislation which sought to shed away the practices of the past and the government is also working to ensure that the efficacy of this legislation remains robust by constantly amending it based on its experience. “Consequently, the need for judicial intervention or innovation from NCLT and NCLAT should be kept at its bare minimum and should not disturb the foundational principles of the IBC” the Supreme Court had said.
The National Company Law Appellate Tribunal (NCLAT) observations came while partly allowing a petition of John Cockerill India, an operational creditor of Asian Color Coated Ispat, which has been transferred to JSW Steel Coated Products, a wholly owned subsidiary of JSW Steel in October 2020 in a Rs 1,550 crore deal. NCLAT had said over two years have passed since the approval of the resolution plan and there is a contrary stand between the parties John Cockerill and JSW Steel over the possession and the ownership of the land owned by the promoter of Asian Color Coated Ispat.
The appellate tribunal said, “We find it a fit case to grant liberty to the Appellant to proceed in accordance with the law in an appropriate forum.” Here John Cockerill had contended the personal property of the promotor, mortgaged with it, could not have been made a part of the Resolution Plan as it is not an asset of the corporate debtor. NCLAT also said it was a peculiar case where Pradeep Agarwal, the promoter of Asian Color Coated Ispat prior to the initiation of insolvency had mortgaged land to John Cockerill, an operational creditor to pair debts.
This was mentioned in the claim after the insolvency was initiated against Asian Color Coated Ispat and when it went to enforce the mortgage deed, the resolution professional had stated that the Plan was approved by a majority of the CoC. RP informed that the land is in possession of the Asian Color Coated Ispat and is part of the land where the factory is located, while the petitioner said it was owned by Pradeep Agarwal and is an unoccupied vacant land, only shares a common access path with the Khapoli Plant.
However, through a settlement, the personal property of the promoter was included in the terms of the settlement. Moreover NCLT through an order dated February 2, 2021, approved the settlement between the promotor and the RP/corporate debtor. The erstwhile RP submitted that as per the plan approval order, the recovery percentage due to the Operational creditors was 2.21 per cent and accordingly an amount of Rs 17.40 lakh was disbursed to John Cockerill He further submitted that the Resolution Plan has been implemented and the amounts have been disbursed to the Creditors in accordance with the Plan and JSW has taken over the management and custody of the company from October 27, 2020.
However, John Cockerill contended the Resolution Plan cannot deal or extinguish its mortgage claims over the personal property without its express consent and it would be entitled to recover the remaining outside amount of Rs 7.96 crore.