A view of Supreme Court of India (file photo) | Photo Credit: SHIV KUMAR PUSHPAKAR

Decks have been cleared for Ramakrishna Forgings Ltd to take over the auto components manufacturer ACIL after the Supreme Court overruled the verdicts of NCLAT and NCLT last week, which were holding back the takeover.

The issue was whether or not the Tribunals could look beyond the “commercial wisdom” of the Committee of Creditors and see if the resolution plan was good enough.

The insolvency proceedings were initiated by IDBI Bank. ACIL owed creditors ₹1,830 crore, but the final resolution plan envisaged payment of ₹129.5 crore, plus the proceeds of the sale of land owned by the company at Manesar. Ramakrishna Forgings’ initial offer was ₹74 crore, but was increased after 31 rounds of negotiations. But NCLT kept the resolution plan in abeyance and asked the Official Liquidator (OL) to provide exact value of the assets.

Ramakrishna Forgings’ counsel, Shyam Divan, successfully argued that “there was no occasion for the NCLT to embark upon a totally alien procedure of getting the OL involved in such valuation.”

The SC Bench headed by judges Ahsanuddin Amanullah and Vikram Nath were “unable to uphold the decisions” of NCLT and NCLAT. They observed that, “The moot question involved is the extent of the jurisdiction and powers of the Adjudicating Authority to go on the issue of revaluation in the background of the admitted and undisputed factual position that no objection was raised by any quarter with regard to any deficiency/irregularity, either by the RP or the appellant or the CoC, in finally approving the Resolution Plan which was sent to the Adjudicating Authority-NCLT for approval.”

The SC felt that “both the NCLT and NCLAT erred to fully recognise that under the resolution plan, the corporate debtor was set to be revived and not liquidated.”

Published on December 6, 2023