CoC Cannot Claim Net Gain From Subsequent Land Acquisition After Approving Resolution Plan: NCLT Mumbai

The National Company Law tribunal (NCLT) at Mumbai has held that creditors cannot claim the benefit of a subsequent increase in the value of a corporate debtor's assets after approving a resolution plan. The tribunal ruled that the gain cannot be claimed merely because the increase was not contemplated when the plan was approved.

A bench of Judicial Member K.R. Saji Kumar and Technical Member Anil Raj Chellan observed that once a resolution plan has been approved by the Committee of Creditors (CoC), its commercial terms cannot be reopened to capture gains arising from a later land acquisition process.

“After approval of the Resolution Plan, the CoC cannot claim net gain arising out of the proposed acquisition of land belonging to the Corporate Debtor on the ground that the proposed acquisition was not within its consideration at the time of approval of the Resolution Plan.”, it ruled. 

The case arose from the corporate insolvency resolution process of Premier Ltd. The CoC approved a resolution plan submitted by Fab Metals Pvt. Ltd. with a 92.47% voting share in January 2022. The application seeking approval of the plan has remained pending before the tribunal.

In June and July of 2024, the RP received several notices from state seeking to buy the corporate debtor's property in Thane for a Multipurpose Corridor Project. Edeleweiss ARC, one of the creditors, fathomed that this will increase the value of CD's assets.

It sought directions that the resulting gains should benefit creditors rather than the successful resolution applicant.

The tribunal examined a resolution circulated by the Resolution Professional through email. Edelweiss supported the proposal, while the remaining creditors did not respond. The bench held that such a process could not be used to affect a resolution plan that was already awaiting approval.

“Neither CoC can decide on matters that affect the Resolution Plan submitted before the Adjudicating Authority, nor can the Adjudicating Authority grant any approval to give effect to any resolution which affects the Resolution Plan, unless such change is consented to by the Successful Resolution Applicant," it ruled. 

The tribunal also accepted the successful resolution applicant's contention that it had the right to challenge actions directly affecting the approved plan. It observed that the applications filed by the Resolution Professional and Edelweiss stemmed from a resolution that had not been validly passed. Denying the successful resolution applicant a hearing would offend principles of natural justice, it held.

Rejecting Edelweiss' request to send the plan back to the CoC for fresh consideration, the bench held that neither the discovery of additional assets nor a later increase in asset value justified reconsideration of a resolution plan that had already secured creditor approval.

“No modification or withdrawal of the Resolution Plan pending consideration before the Adjudicating Authority is permissible and the Resolution Plan approved by the CoC cannot be remanded back for maximisation of value of the Corporate Debtor.”, it ruled.

The tribunal accordingly declined to remand the resolution plan to the CoC. It left open the question of how specific provisions of the resolution process documents and the resolution plan may apply to any acquisition compensation received in future.