The corporate insolvency resolution process involving Baghauli Sugar and Distillery, a Sahara Group company, has brought out a fresh conundrum in view of a Supreme Court order barring the group from parting with property without its permission.
The National Company Law Tribunal in Allahabad, which is hearing the Baghauli Sugar case, said last week that “it is open for the suspended management” to submit a revised one-time settlement proposal for fresh consideration by the committee of creditors.
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Alternatively, the NCLT suggested that the suspended management of Baghauli Sugar could seek a clarification/modification of the order passed by the Supreme Court.
The committee of creditors or the resolution professional could clarify from the apex court whether the continuation of insolvency proceedings against the company is in consonance with the Supreme Court’s order of November 21, 2013, the NCLT said in an order dated August 27, 2021.
Abhinav Gaur, who appeared for the suspended management, had argued that the insolvency proceedings against Baghauli Sugar violated the Supreme Court order in the Sahara Group case pertaining to the refund Rs 17,500 crore collected from investors.
Bank of Baroda initiated the proceedings against Baghauli Sugar on February 7, 2020, which was opposed by the suspended management.
According to Gaur, the proceedings went against the Supreme Court order that said no Sahara Group company shall part with any movable and immovable property without the admission of the court. If the proceedings were allowed, the petitioner argued, it would be a cause for “great miscarriage of justice.”
Continuing with the process would result in either approval of a resolution plan or liquidation of the company.
“Both cannot be acted upon unless the leave of the Supreme Court is obtained,” the petitioner said.
The petitioner submitted before the NCLT that the entire shareholding in Baghauli Sugar had been transferred to Sahara Prime City on October 1, 2012, thus becoming a fully owned subsidiary of the Sahara Group.
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With the NCLT suggesting that the parties concerned seek the view of the Supreme Court on the way forward, a question mark has arisen over the insolvency proceedings against Baghauli Sugar, which have exceeded the mandatory period.
The evolution of the resolution process under the Insolvency and Bankruptcy Code of 2016 has thrown up new challenges in implementation and the unfolding dynamics give stakeholders new insights and fresh lessons on the way forward.
The Parliamentary Standing Committee on Finance had underscored the need to refresh the act to include learnings and make the process transparent and fair. As part of this endeavour, the panel recommended forming a code of conduct for the committee of creditors, whose supremacy has been reiterated by the Supreme Court.
For now, in the Baghauli Sugar case, it’s over to the Supreme Court.
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