NEW DELHI: The Supreme Court has stayed an NCLAT order allowing Anjanee Kumar Lakhotia, the promoter of ailing MBL Infrastructure, to take over the company under a resolution plan submitted under the Insolvency Code despite a specific bar against it in the law.

The top court will now examine the issue on February 2, 2020.

Acting on a plea by banks led by Bank of Baroda, IDBI and SBI, a bench comprising Justices Arun Mishra and Surya Kant stayed the NCLAT order of August 16, 2019, dismissing an appeal against the Kolkata NCLT decision to allow such a resolution plan to go through.

RBL bank had initiated the corporate insolvency resolution process against the company in 2017. The COC eventually cleared a resolution plan submitted by Lakhotia with a 78% vote.

The NCLT upheld the resolution plan rejecting pleas by the banks that the promoter cannot bid for an ailing company in the face of the bar under Section 29A of the Code.

The banks contended that under Section 29A (h) Lakhotia, being the Managing Director, Promotor, Personal Guarantor of the Corporate Debtor, was ineligible to be a resolution applicant.

The tribunal ruled that the personal guarantees against Lakhotia had not been invoked and hence he was not barred under either under Section 29A(c) and (h).

The banks then went to the NCLAT pointing that the NCLT finding that bank guarantees had not been invoked against Lakhotia were “erroneous” and placed on record the letters invoking the guarantees. In fact, Lakhotia had been declared a “wilful defaulter” by Bank of Baroda, the banks pointed out. But the NCLAT ruled against them and refused to interfere with the plan as it did not discriminate between the operational and financial creditors.

The banks then appealed to the top court. Among other things they pointed out the incongruity of allowing the promoter/MD to make an upfront payment of only Rs 59.86 crore although the total debts of the financial creditors stood at a whopping Rs 1480.17 crore.

The rest of the Rs 1188.34 crore was to be paid in the form of non-convertible debentures redeemable after 8 years.

“How could such a resolution plan made at the instance of the MD/promotor be accepted?” Can a promoter through the IBC circumvent the entire recovery process and regain control resulting in a huge haircut by secured creditors,” BOB’s appeal demanded to know.

The ailing company, the promoter and the COC will now have to file their replies to the top court notice so that the top court can examine all the legal issues involved in the case.

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