SC upholds NCLT order in United Seamless Tubulaar case

V Rishi Kumar Hyderabad | Updated on February 25, 2020 Published on February 25, 2020

Ruling paves way for Maharashtra Seamless’ acquisition of distressed pipe-maker

The resolution process of United Seamless Tubulaar Pvt Ltd has come to an end — after nearly a year’s wait — with the Supreme Court upholding the order passed by the National Company Law Tribunal (NCLT).

The apex court upheld the approval of the resolution plan passed by the NCLT in January 2019. A three-judge SC Bench of Rohinton Fali Nariman, Aniruddha Bose and V Ramasubramanian passed the order in the case, directing V Venkatachalam, the Resolution Professional (RP), to take physical possession of the assets of the corporate debtor and hand them over to Maharashtra Seamless Ltd (MSL).

MSL, a DP Jindal Group company that makes seamless pipes, was the highest bidder for United Seamless’ assets, and its resolution plan was okayed by the latter’s Committee of Creditors (CoC) and approved by the NCLT. However, the case took several twists and turns and the matter went up to the Supreme Court.

Transfer of assets

The Supreme Court upholding the NCLT ruling has paved the way for the RP to take control of the company’s assets with the help of the local administration and transfer possession of United Seamless Tubulaar to MSL.

The RP concluded the possession formalities within the stipulated timelines and filed an affidavit with the NCLT. The process concluded last week.

The apex court, in its landmark judgment, has addressed the core issue of whether the Insolvency and Bankruptcy Code, 2016, stipulates that the sum forming part of the resolution plan should match the liquidation value.

The court, referring to the Essar Steel judgment, held that the valuation under the Code is only to assist the CoC to take a decision on the resolution plan, and that the Code does not mandate that the resolution plan amount should necessarily be more than the liquidation value.

Commercial wisdom of CoC

It held that according to the scheme of the Code, the courts ought to cede ground to the commercial wisdom of the CoC rather than assess the plan on the basis of a quantitative analysis.

The judgment, according to experts, brings much-needed clarity on the limited review of power of courts, supremacy of commercial wisdom of CoC, and the role of liquidation value of the resolution plan.

The RP was assisted by Brahmayya Co, which was appointed by Deutsche Bank, the majority foreign lender.

Published on February 25, 2020
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