CONTINUOUS INTERNAL ASSESSMENT – II

LAW OF BANKRUPTCY

On
“CASE ANALYSIS OF PRATAP TECHNOCRATS VS RELIANCE INFRATEL
LTD”

Submitted to:
AMITESH DESKMUKH SIR

Assistant Professor

“Faculty of Insolvency law”

Submitted by: PRATEEK

Roll no. - 113

Semester VIII, Section B

Submitted on

14 March, 2023

“HNLU, RAIPUR (C.G.) – 492009”

 “DECLARATION OF ORIGINALITY”

“I, Prateek hereby declares that this Continuous Internal Assessment (CIA) which is
titled CASE ANALYSIS is original work of research and any importations have been
duly cited. I hereby declare that this research project has been prepared under the Able
Guidance of Mr Amitesh deshmukh sir, Assistant Professor of law of bankruptcy
Hidayatullah National Law University, Raipur.”
 FACTS AND BACKGROUND-

The Supervision Board of Reliance Infratel Ltd. and Pratap Technocrats (P) Ltd. &
Ors. are at odds with one another   The issue surrounds Reliance Infratel Ltd., a
subsidiary of Reliance Communications Ltd., and the sale of its assets. Due to
Reliance Communications Ltd.'s failure to make loan payments, its assets are offered
for sale. A division of Reliance Communications Ltd., Reliance Infratel Ltd. held a
number of telecom towers and associated properties. The COC  accepted the proposal
from Pratap Technocrats (P) Ltd. & Ors. for the properties of Reliance Infratel Ltd. &
Ors., Technocrats (P) Ltd.

Nevertheless, the selling of the properties to Pratap Technocrats (P) Ltd. & Ors. was
rejected by the Advisory Group of Reliance Infratel Ltd as they lacked the required
technical know-how, the Monitoring Committee claimed Pratap Technocrats (P) Ltd.
& Ors. were ineligible to possess the telecom towers. Pratap Technocrats (P) Ltd. &
Ors. stated it had the needed specialized know and had given the CoC  the relevant
data. Moreover, they contended that the Supervisory Committee lacked the power to
protest the asset transaction. The l (NCLAT) heard the matter and determined that the
Supervisory Committee lacked the power to contest the asset sale. Pratap Technocrats
(P) Ltd. & Ors. were also found by the NCLAT to possess the required technical
know-how and qualification to own the telecom towers. The Supervision Committee
then filed an appeal with the Indian Supreme Court.

ISSUES BEFORE THE COURT-

Whether the supervising committee had the authority to request that the appellants
should not dispose the property and whether the NCLT and NCLAT was  wrong in
rejecting the appellants' appeals were the primary issues before the court.
 ANALYSIS-

The SC explained three factual issues that affected the outcome of the Appeal
when addressing the question of the jurisdictional powers of tribunals while
ascertaining a R plan.

 Valuation of Pref share-

The Appellants argued that the liquidated value did not reflect the realisable
value of the preferential share owned by “Reliance Bhutan Ltd”, which was INR
800 crores. The SC noted that the assertion was completely inaccurate because it
was backed by pertinent snippets from financial statements by appointed valuers
and took into account the realisable value for the CD on consideration of any
revenue from the preferential shares in determining its liquidity value.

 Liquidation value

The apex court explained that if the liquidated valuation of the net realizable
value of the preferred stock were to be measured separately for dispersal among
all OCs, in accordance with the precedence delimited in provision 53(1) of the
Code, the liquidated value owing to the Complainants will indeed endure first.

 The effect of omission of FCs

Due to the resolution plan's sustained approval with a 100% majority even after
some financial creditors' exclusion, as well as the fact that the solitary effect
would be the financial creditors “inter se distribution”, who exerts no effect on
OCs, the segregation of some FCs has no bearing on those creditors.

 Question on jurisdiction of the adjudicating authority

Apex court reviewed the IBC's various provisions relating to the subservience
and authorization of a RP and noted that provision 30(1) of the Code allows a
resolution applicant to submit a plan, and the RP is mandatory to make sure the
plan complies with the legal compliances in Section 30(2) of the IBC,
specifically clauses (a) to (f). The Committee may accept a RP with such a vote
percent of just not just under 66% of the share capital of the financial creditors
in accordance with provision 30(4) of the Code once the RP has presented the
plan to it for clearance.

The SC noted that in light all of this, the NCLT's authority in accordance with
provision 31 of IBC is restricted to deciding whether the RP authorized by the
CoC under Provision 30(4) of the IBC satisfies Section 30(2)'s criteria. This
jurisdiction is established, acknowledged, and given by legislation, and it's
unable to be compared to an equitable jurisdiction that’s capable of the act's
rules. Similar to this, the NCLAT's authority under Section 61(3) of the IBC is
restricted to the grounds listed therein when it comes to reviewing an appeal
against a decision authorizing a settlement plan.

In K Sashidhar v. India Overseas Bank and Essar Steel India Ltd (supra ), the
dependable legal doctrine that tribunals cannot enter into the commercial wisdom
affecting the plan accepted and approved by the committee was relied upon by
the apex court on determining the jurisdictional aspect of the case.

The apex court noted that the Code is a complete in itself and that it establishes a
broad framework for what is fair and equitable. Therefore, it will be an improper
use of the NCLT’s reviewing authority to claim that a residual jurisdiction must
be used to change the complex socioeconomic coordination that is contemplated
by the Act.
 JUDGEMENT

The Honorable Supreme Court noted that the CoC had adopted the settlement plan in
accordance with IBC guidelines. According to the Apex Court, the NCLT had the authority to
decide under Section 31(1) if the RP, as authorised by the CoC, conformed with provision 30.
(2). It was noted that the NCLT's approval of the resolution plan, which complies with the
IBC, fell within its purview. The resolution plan in this matter had been lawfully authorised
by the required voting of the CoC in accordance with provision 30(4) of the IBC, the Apex
Court remarked. After the plan was adopted by a majority voting of the CoC, it made no
difference whether or not part of the financial creditors was needed to be omitted from the
CoC. The stipulations of Section 31(1) of the IBC limited the NCLT's authority to assessing
whether the proposal, as authorised by the CoC, met the criteria of Section 30(2). The NCLT
and NCLAT's judgements are therefore in accordance with the law provided the statute's
prerequisites have been adequately met.

CONCLUSION AND OPINION

By means of the aforementioned judgement, the SC has established the limits of the authority
of the AA and the Appellate Authority, exactly like it did with the earlier decisions. The
Apex Court has once again emphasised the "Commercial acumen of the CoC," giving the
CoC's judgement the utmost significance. The verdict raises certain questions, nevertheless,
about the potential for arbitrary decision-making when approving a Resolution Plan.
Although the CoC's independence inspires trust in the Financial Creditors, it is crucial to
establish a framework that the CoC must adhere to when approving a Resolution Plan in
order to prevent the CoC from making an arbitrary decision. To remedy this, the policy
makers are now in a process to introduce a ‘Code of Conduct for the CoC’.

Although some foreign regimes permit RP to be contested on the basis of equity

and justice, the legislature purposefully decided not to grant the NCLT any
autonomous equity-based authority. Furthermore, the precedence established by
the apex court are in line with the advice offered in the “UNCITRAL
Legislative” Guidance on Insolvency Law, which provides preferability for a
court to refrain from examining the financial and commercial foundation of a
creditor's choice. The SC has repeatedly reaffirmed that the NCLT or the NCLAT
cannot evaluate the commercial or business actions of financial creditors in a
court of law.