Former promoters can not proceed holding residual stake in an insolvent firm after it has been acquired by one other entity underneath the Insolvency and Bankruptcy Code (IBC), the Supreme Court has mentioned.
A bench of Justice MR Shah and Justice Krishna Murari on Friday dismissed an attraction by Neeraj Singal, the previous promoter of Bhushan Steel, and others. The court docket agreed with the orders of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) in the case and noticed no advantage in passing a distinct order.
The promoters held 2.35 per cent stake in the corporate after Tata Steel acquired 72.65 per cent shares in the course of the decision course of underneath the IBC.
“The appellants are the erstwhile promoters and therefore they cannot be continued to be in the Company in any capacity, maybe as shareholders, as rightly observed by the NCLAT,” mentioned the court docket mentioned.
Bhushan Steel had a debt of about Rs 56,000 crore in 2017, when the Reserve Bank of India recognized it as among the many 12 huge mortgage defaulters to endure insolvency.
The NCLT accepted Tata Steel’s bid for Bhushan Steel in May 2018. However, the promoters of Bhushan Steel and L&T, a lender to the corporate, challenged Tata’s bid earlier than the NCLAT
Tata Steel’s decision plan was to amass Bhushan Steel for Rs 35,200 crore, pay one other Rs 1,200 crore over the following 12 months to collectors after which convert the remaining debt owed to banks to fairness.
Bhushan Steel’s promoters alleged that Tata Steel was disqualified from the bid as its subsidiary confronted trial in the United Kingdom. The NCLAT rejected the argument and mentioned the subsidiary is a “related individual” of Tata Steel Ltd. “It does not attract the disability under Section 29A of the IBC. We also hold that ‘Tata Steel Limited’ is eligible to file the resolution plan,” mentioned NCLAT.
Separately, L&T argued that Tata Steel’s supply was not truthful to lenders. The NCLAT rejected this argument too and mentioned that Tata’s decision plan was truthful and equitable to all lenders.
The Supreme Court mentioned that if submissions by all appellants is accepted then the decision plan shall not be workable in any respect.
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