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The National Company Law Tribunal (NCLT) order directing modification to the resolution plan submitted by Jawaharlal Nehru Port Trust (JNPT) for the debt-laden Dighi Port Ltd could spell trouble for the ₹853.28-crore deal that was approved by the lenders’ panel and ratified by the insolvency court in Mumbai on May 8.
The NCLT direction pertains to sub-lease deeds and sub-concession agreement signed between Dighi Port and the Veritas Group for setting up a PVC plant and to finance, develop, operate and maintain a cargo berth at the port.
In its resolution plan, JNPT had sought to terminate the sub-lease deeds and sub-concession agreement signed with Veritas Group citing that the terms and conditions were onerous and not in the long-term interests of the company. The sub-lease, according to JNPT, was “under-valued” compared to lease rentals of other similarly situated land, thereby causing loss to the corporate debtor (Dighi Port).
On its part, the Veritas Group submitted that the I&B Code does not envisage curtailment, extinguishment, modification or amendment of the rights and interests of bona fide third parties nor can it be obliterated under the pretext of insolvency resolution of the corporate debtor.
It further contended that the extinguishment of Veritas’ rights would not only be contrary to principles of law and equity but also be in complete contravention of the explicit agreements entered into by the corporate debtor and Veritas.
These rights, according to the agreements, will continue to be valid even after the termination of the concession agreement of the corporate debtor itself.
Sub-lease deeds
JNPT said it was willing to renegotiate the sub-lease deeds for lease of land and grant of certain other rights to Veritas on mutually acceptable commercial and other terms.
“In case the negotiation fails, the resolution applicant (JNPT) proposes to terminate all Veritas agreements as an integral part of the resolution plan and Veritas shall be treated as Form F creditor/operational creditor of the company and shall be paid accordingly at par with other operational creditors,” JNPT stated.
“We are happy to see that the resolution applicant has in good faith allowed an opportunity to Veritas for renegotiation. However, it does not have any right to terminate legally binding contracts unilaterally without following the due process for termination as per applicable law under the garb of a resolution plan. The renegotiations are welcome, and this Tribunal could not have demanded anything more than an amicable settlement of the dispute within the parties themselves out of these proceedings. However, this Tribunal is not inclined to give any exemptions or unilateral termination of legally binding contracts creating rights of third parties and existing before the initiation of the corporate insolvency resolution process.”
The resolution applicant is directed to file an affidavit before this Tribunal submitting its acceptance or rejection of the said modification in the resolution plan,” the NCLT wrote in its May 8 order.
JNPT board will take a call
“The NCLT has directed JNPT to modify its resolution plan. The board of trustees of JNPT will shortly take a call on whether the modification is acceptable to it or not,” a Shipping Ministry official said.
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