Automatic waiver of legal proceedings against/by Corporate Debtor not allowed in a Resolution Plan, NCLT

The National Company Law Tribunal has held that automatic waiver or abetment of legal proceedings which may be pending against or by the Corporate Debtor cannot be allowed in a Resolution Plan under the Insolvency & Bankruptcy Code, 2016. .The Order was passed by a two-member Bench of NCLT, Ahmedabad comprising Member (Judicial) Manorama Kumari and Member (Technical) Chockalingam Thirunavukkarasu..Reliance Commercial Finance Ltd had filed an application under Section 7 IBC seeking initiation of corporate insolvency resolution process against the Corporate Debtor VS Texmills Pvt Ltd..The plea was admitted in January 2019 and an Interim Resolution Professional (IRP) was appointed..Thereafter, claims were collated and meeting of the Committee of Creditors was called in February, the IRP was appointed as the Resolution Professional. Subsequently, two entities, submitted their Expression of Interest to the Resolution Professional..However, after one of the applicants withdrew their resolution plan, the reamining resolution plan submitted by Chamaria Fashions Pvt Ltd’s was discussed by the CoC in June,2019..Meanwhile, the CIRP period was extended by another 90 days..Eventually, the resolution plan of Chamaria Fashions was approved by the CoC in October 2019 with a majority voting share of 92.44%..The Resolution Professional thus filed the instant application under Section 30(6) for approval of Chamaria Fashions resolution plan in terms of Section 31(1) IBC and regulation 39(4) of the CIR Regulations..The NCLT perused the procedure followed during the CIRP, the resolution plan as well as the payment schedule proposed therein. It stated the approval of the resolution was as per the law under clauses (a) to (f) in Section 30(2) IBC read with Section 31 IBC..The NCLT, however, pointed out that a section of the resolution plan titled ‘Clause No.e of Chapter IV: Assumption and Limitations of Resolution Plan’ could not be allowed..The clause read as follows,“..All business permits required by the Corporate Debtor to conduct its busimess and which have no been granted, cancelled, terminated, revoked, suspended or not renewed; having been granted or reinstated, as the case may be, at no additional cost to the Resolution Applicant or Corporate Debtor..”The NCLT noted that the clause could not be allowed as the issue of business permits was a subject matter of various Competent Authorities which had their own jurisdiction.It remarked,.“..we are of the view that approval of the Resolution Plan does not mean automatic waiver or abetment of legal proceedings, if any, which are pending by or against the Company/Corporate Debtor as those are the subject matter of the concerned Competent Authorities having their proper/own jurisdiction to pass any appropriate order as the case may be. The Resolution Applicant(s) on approval of the Plan may approach those Competent Authorities/ Courts/Legal Forums/ Offiers- Govt or Semi Govt / State or Central Govt for appropriate relief(s) sought for in Clause No. e of Chapter IV of the Resolution Plan.”NCLT.In view of the above, the Resolution Plan was therefore approved sans 'Clause No. e' by the NCLT.Read the Order: