NCLAT gives Marg promoter Reddy a chance to settle dues and exit from bankruptcy proceedings

The National Company Law Appellate Tribunal (NCLAT) has allowed G R K Reddy, the promoter of Chennai-based infrastructure developer Marg Ltd, to submit a proposal to clear the dues of financial and operational creditors.

If Reddy makes a proposal and the same is accepted by the lenders, Reddy could regain control of the company which was hauled to the National Company Law Tribunal (NCLT) in May this year by ICICI Bank.

The NCLAT order came on a petition brought by Reddy against the decision of NCLT to start corporate insolvency resolution process (CIRP) against Marg for defaulting on dues to ICICI Bank worth Rs 71.69 crore.

During a hearing on August 7, the counsel for Reddy informed NCLAT that the company promoter has already settled the matter with the ICICI Bank (financial creditor), who triggered the proceedings under Section 7 of the Insolvency and Bankruptcy Code (IBC).

The counsel for ICICI Bank submitted that a settlement had been reached but the amount is yet to be paid by Reddy. NCLAT then ordered Reddy to “settle the matter with all the creditors” and may derive the benefit of Section 12A of the IBC by proposing the terms of settlement for all the ‘financial and operational creditors’ and other stake holders.

“If any such proposal is submitted, the ‘Interim Resolution Professional’ will call for a meeting of the ‘Committee of Creditors’ and place the matter before it for consideration in accordance with Section 12A. If the ‘Committee of Creditors’ approves the proposal with 90% of voting shares, it will be open to ICICI Bank to move an application before the Adjudicating Authority for withdrawal of the application under Section 7,” NCLAT wrote in its August 7 order.

“For the purpose of the above said procedure, we allow two weeks’ time to the Appellant (Reddy) to submit the proposal before the ‘Interim Resolution Professional’, who immediately on constitution of ‘Committee of Creditors’, will place the matter before it and the ‘Committee of Creditors’ is expected to decide it within two weeks thereof. On failure, this Appellate Tribunal may consider the case on merit,” NCLAT ordered.

Section 12A of the IBC allows the corporate debtor another chance to rectify the default and retain control over the firm even after it is admitted to NCLT. Under this provision, the adjudicating authority may allow the case to be withdrawn from insolvency proceedings if 90 per cent of the committee of creditors (CoC) agrees to it.

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