Oct. 14, 2019 - The National Company Law Appellate Tribunal has set aside an order of the Mumbai National Company Law Tribunal admitting a plea filed by bentonite and bauxite exporter Ashapura Minechem Ltd. for initiation of insolvency proceedings.
The appellate tribunal observed that plea to initiate insolvency against it was filed by Ashapura Minechem under Section 10 of the Insolvency and Bankruptcy Code without any prior approval of the annual general meeting or extraordinary general meeting of the company.
Section 10 of the IBC allows a company to file application for initiation of corporate insolvency resolution process before the NCLT after it has committed a default. Setting aside the order of the Mumbai bench of the NCLT, which had on March 15, 2019 admitted the company's plea and had directed to initiate insolvency proceedings, NCLAT said it was against the law and asked to close the proceedings.
NCLT, in its order, had said that there was also "no requirement for inviting resolution plans" for the company to find a new buyer as a resolution plan was "already in existence", which was "already considered by the bankers during SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act) Proceedings".
It had also said that there was "no requirement of publication to invite expression of interest for inviting a resolution plan.
This order was challenged by the firm's lenders JP Morgan Chase Bank NA, HDFC Bank and Armada Singapore Pte before the NCLAT.
Setting aside the NCLT order, a three-member NCLAT bench headed by Chairperson Justice S J Mukhopadhaya said, "We are of the opinion that the impugned order dated 15th March, 2019 is against the provision of law and cannot be sustained."
"It is not in dispute that the application filed under Section 10 is without approval of the 'Annual General Meeting' / 'Extra-Ordinary General Meeting'," it added. "Simultaneously a plan was submitted which is against the provision of Section 65 of the I&B Code as it appears that it is filed with malicious intent for any purpose other than for the resolution of insolvency and liquidation," the NCLAT said.
NCLAT added that all orders passed by the NCLT, such as appointing an interim resolution professional, declaring moratorium and freezing accounts along with actions taken by the resolution professional, are "declared illegal and are set aside".
Earlier on July 8, the appellate tribunal prohibited the NCLT from passing any order in this case.