Ramkrishna Forgings Gets Relief From Apex Court In Quest To Acquire Bankrupt ACIL

Ramkrishna Forgings Ltd. got some relief from the Supreme Court in its quest to acquire the bankrupt ACIL Ltd., which makes high precision engineering automotive components.

The Supreme Court on 21 November directed the National Company Law Tribunal (NCLT) to decide on the approval of the company’ successful resolution plan within three weeks, Ramkrishna Forgings said in a stock exchange announcement.

The apex court upheld the contention of the company that the NCLT cannot appoint an official liquidator in such case since, amongst other things, the commercial wisdom of the committee of creditors is supreme, the manufacturer of open and closed die forgings of carbon and alloy steel, micro alloy steel and stainless-steel forgings said.

THE BACKGROUND

ACIL was admitted into the corporate insolvency resolution process (CIRP) following an application filed by IDBI Bank Ltd., according to the Supreme Court’s order. Against the total claim of about 1,830 crore rupees ($220 million), the amount of admitted claim in the CIRP was 1,782 crore rupees, it said.

Following the bidding process, Ramkrishna Forgings was selected by ACIL’s committee of creditors as the successful resolution applicant for the acquisition of the company through insolvency process under the Insolvency & Bankruptcy Code (IBC).

Ramkrishna Forgings’ first resolution plan offered to pay 74 crore rupees to all the stakeholders of ACIL, including 63.50 crore rupees to the financial creditors. After a series of negotiations, the final resolution plan was submitted on 5 August 2019, in which the total payout was increased to 129.50 crore rupees and the financial creditors were to get upfront payment of 80.44 crore rupees.

The resolution plan further provided that proceeds from the monetization of the land situated at Manesar will go to the financial creditors.

Ramkrishna Forgings’ final resolution plan was approved by ACIL’s committee of creditors on 14 August 2019 by a majority of 88.6% votes.

The company’s resolution professional later that month sought the approval for the resolution plan from the NCLT. However, the tribunal on 1 September 2021, kept its approval in abeyance and the official liquidator was directed to provide exact figures/value of assets of ACIL.

Ramkrishna Forgings later challenged the NCLT’s order before the National Company Law Appellate Tribunal (NCLAT), which dismissed the company’s appeal on 19 January 2022, thereby upholding the order of the NCLT.

APEX COURT ORDER

In its order on 21 November 2023, the Supreme Court remarked it is clear that the order dated 1 September 2021 by the NCLT cannot withstand judicial scrutiny, either on facts or in law.

There may have been a situation where due to glaring facts, an order could be left untouched and this court would have refrained from interference, but only if detailed reasoning, disclosing the facts for being persuaded to embark on such path, were discernible in the NCLT’s order, which unfortunately is cryptic and bereft of detail, it added.

The apex court noted the NCLT’s order suffers from a jurisdictional error, as in the facts that prevailed, it was not entitled to pass the direction that it did.

The Supreme Court said under the circumstances, it could have adopted the course of remanding the matter back to the NCLT for fresh consideration, but this would impede quick resolution as the CIRP is in a stalemate right from 1 September 2021.

“After having applied our minds to the factual aspects also, we do not find that remand for consideration afresh, now, would serve the purpose of justice or aid the objects of the code,” it added.

The apex court set aside the NCLT as well as the NCLAT’s orders and directed the NCLT to pass appropriate orders on the approval resolution plan within three weeks.

Note: $1 = 83.3208 Indian rupees

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