NCLAT held that a successful resolution applicant cannot suddenly be faced with undecided claims
The National Company Law Appellate Tribunal (NCLAT) has set aside conditions imposed on JSW Steel by the Delhi bench of the National Company law Tribunal, relating to unrecovered dues, carried forward losses and rights of subsidiaries in the Vardhman Industries (VIL) case.
A bench headed by NCLAT chairperson justice SJ Mukhopadhyay held that a successful resolution applicant cannot suddenly be faced with undecided claims. “… this would amount to a hydra head popping up which would throw into uncertainity amounts payable by a prospective resolution applicant who successfully takes over the business of the corporate debtor,” justice Mukhopadhyay said in a judgment dated November 4.
JSW’s resolution plan for the stressed Vardhman Industries was approved by the National Company Law Tribunal in December 2018. The NCLT, on April 16, 2019, modified the resolution plan holding that any unrecovered amount due to VIL from any third party would be used to pay the balance amount to dissenting financial creditors. It also directed the successful resolution applicant to approach Income Tax (IT) department for the entitlement of carry forward losses. It also declined to end claims of VIL’s subsidiaries, associate companies and joint ventures over it.
JSW had argued that the NCLT was not empowered to impose any condition after the committee of creditors had approved the plan.
“The learned NCLAT has acknowledged the amendment to section 79 of the IT Act and after giving an opportunity of being heard by the IT Department has asked the Department to act in accordance with Law with respect to carry forward of losses of the corporate debtor,” advocate Nakul Sachdeva, who represented JSW Steel, said.