NCLT can’t allow tweaks in a successful resolution plan: SC

NCLT can’t allow tweaks in a successful resolution plan: SC

Part of: Prelims and GS II – Important statutory bodies.

Context The Supreme Court on Monday held that the National Company Law Tribunal (NCLT) cannot permit withdrawals or modifications of a successful resolution plan, once it has been submitted to it after due compliance with the procedural requirements and timelines.

• Such an open-ended process for further negotiations, would have a negative impact on the corporate debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time.

Background 

• The judgment relates to the NCLT’s decision to allow Ebix Singapore Private Limited to withdraw its resolution plan submitted for Educomp Solutions.
• The NCLAT had, however, reversed the NCLT order, saying the latter did not have jurisdiction to permit such withdrawal.
• The correctness of the NCLAT decision had come up on appeal before the Supreme Court.

What is NCLAT?

• National Company Law Appellate Tribunal (NCLAT) was constituted under Section 410 of the Companies Act, 2013. 
• NCLAT is the Appellate Tribunal for hearing appeals against the orders passed by – 
  • National Company Law Tribunal(s) (NCLT) under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC)
  • Insolvency and Bankruptcy Board of India (IBBI) under Section 202 and Section 211 of IBC. 
  • Competition Commission of India (CCI) – as per the amendment brought to Section 410 of the Companies Act, 2013.

What is NCLT?

• National Company Law Tribunal is a quasi-judicial body in India that adjudicates issues relating to companies in India.
• Established on 1st June, 2016 (Companies Act, 2013).
• Formed based on the recommendations of the Justice Eradi Committee.
• It deals with matters mainly related to companies law and the insolvency law.
• Term of members: Appointments will be for five years from the date of assumption of charge or till attaining the age of 65 or until further orders.

News source: TH