IBC Overriding Effect Not Available For Restructuring Outside Approved Resolution Plan: NCLT Hyderabad

The Hyderabad Bench of the National Company Law Tribunal (NCLT) on 12 June held that post-approval restructuring measures cannot claim the overriding effect of the Insolvency and Bankruptcy Code, 2016 unless they form part of the approved resolution plan.

Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri dismissed an application filed by successful resolution applicant Krishna Kumar Haridas seeking directions to permit post-resolution capital restructuring of Fenoplast Ltd, continuation of its stock exchange listing, and related regulatory approvals. The Bench noted:

“Where such restructuring is not part of the approved resolution plan, the benefit of any such dispensation or overriding effect under the IBC cannot be claimed. Such actions would, therefore, remain subject to the provisions of the Companies Act, 2013, the Securities Contracts (Regulation) Act, 1956, the applicable regulations framed by the Securities and Exchange Board of India, and other relevant statutory provisions, including such approvals, permissions, exemptions or sanctions as may be required from the competent authorities.”

The resolution plan for Fenoplast Ltd was approved by the NCLT on 22 January 2025 and was subsequently implemented after the applicant infused Rs. 76.52 crore towards revival of the company. The plan envisaged cancellation of the existing share capital and delisting of the company.

After implementation, the successful resolution applicant approached the Bombay Stock Exchange (BSE) seeking approval for a revised restructuring proposal that retained public shareholding and continued the company's listing. The BSE directed the applicant to seek appropriate directions from the Tribunal, following which the present application was filed.

The revised proposal sought to retain up to 5% public shareholding, continue Fenoplast Ltd as a listed entity, and induct unidentified new promoters, whereas the approved resolution plan provided for complete extinguishment of existing equity shares and delisting of the corporate debtor.

Holding that the proposed restructuring was not part of the approved resolution plan, the Tribunal observed that it could not be implemented under the Insolvency and Bankruptcy Code framework. It would remain subject to compliance with the Companies Act, 2013, the Securities Contracts (Regulation) Act, 1956, SEBI regulations, and other applicable statutory requirements. The Bench held:

“In these circumstances, the Applicant cannot seek implementation of the proposed restructuring in the present proceedings on the premise that it stands covered by, or flows from, the approved resolution plan. Accordingly, no direction can be issued in the present Application for restructuring or reduction of the public shareholding of the Corporate Debtor, or for induction of a new promoter, dehors the approved resolution plan and without compliance with the applicable statutory framework.”

Accordingly, the NCLT held that no directions could be granted for restructuring, reduction of public shareholding, or induction of new promoters without compliance with applicable laws. It further clarified that the applicant is at liberty to pursue appropriate remedies before the competent statutory authorities in accordance with law.

For Respondent: Ex-parte.