Resolution Plan Approved By Committee Of Creditors Prevails Over SEZ Act & Statutory Dues Claims: SC Dismisses NOIDA Special Economic Zone Authority’s Appeal

The Court dismissed the appeals challenging the National Company Law Appellate Tribunal’s (NCLAT) decision which upheld the approval of a Resolution Plan that prioritised the commercial wisdom of the Committee of Creditors (CoC) and pointed out the overriding effect of the Insolvency and Bankruptcy Code, 2016 (IBC 2016) over other statutory provisions, including the Special Economic Zone Act, 2005 (SEZ Act, 2005).

A Bench of Justice Abhay S. Oka and Justice Augustine George Masih reiterated, “Beside this, as regards the other claims pertaining to the transfer fees, etc. were not to be interfered with by courts or tribunals as the same stood related to the commercial wisdom of the Committee of Creditors for they being the best persons to determine their interests, and any such interference is non-justiciable except as provided by Section 30(2) of IBC 2016. We do not find violation of the statute or the procedure as also the norms fixed as per the decisions referred to above of this Court, the Resolution Plan as approved by the Committee of Creditors, and the same having been accepted deserves and has rightly been left untouched. Fundamentally, the financial decisions as have been taken by Committee of Creditors, especially with regard to viability or otherwise, while evaluating the plan would thus prevail.”

Senior Advocate Manish Singhvi represented the appellant, while Senior Advocate Gopal Jain appeared for the respondents.

Shree Bhoomika International Limited (the Corporate Debtor) was sub-leased a property in the NOIDA Special Economic Zone (NSEZ) by the appellant. The Corporate Debtor defaulted on lease payments starting in 1999 and ceased all activities on the land by 2003-2004, resulting in financial losses to the Government Exchequer and alleged violations of Special Economic Zone rules.

A Resolution Plan was approved by the CoC and later allowed by the NCLT. The appellant contested this, seeking the full amount of Rs. 6.29 crores, asserting its right to recover the entire admitted claim amount.

Following NCLT’s dismissal of the appellant’s objections, the NOIDA Special Economic Zone Authority appealed to the NCLAT, challenging both the approval of the RP. The NCLAT dismissed these appeals as well.

The Supreme Court dismissed the appellant’s claim of insufficient notification regarding auction proceedings, finding no procedural violations on record. It noted that “all dues, including statutory dues” for the period before the Resolution Plan approval were considered settled, with no further proceedings allowed. Additionally, the Bench found no grounds to interfere with the CoC’s commercial decisions, as these decisions lie within the “commercial wisdom” of the CoC and are deemed “non-justiciable.”

Consequently, the Court remarked, “As far as the submission of the Learned Senior Counsel that exemptions from NSEZ payments, including any type of fees or penalty for renewal of sub-lease and/or for transfer charges due with regard to the change of directorship or shareholding in favour of the Resolution Applicant has to be dealt with as per Clause 10.9 of the Resolution Plan cannot be accepted in the light of Section 238 of IBC 2016, which provides for the provisions of IBC 2016 to have an overriding effect over the other laws. If that be so, the obvious effect is that the same would prevail, leading to the provisions as contained in the SEZ Act 2005 giving way to IBC 2016.”

Accordingly, the Supreme Court dismissed the appeals.

Cause Title: Noida Special Economic Zone Authority v. Manish Agarwal & Ors. (Neutral Citation: 2024 INSC 839)

Appearance:

Appellant: Senior Advocate Manish Singhvi; AOR Manju Jetley; Advocates Anshul Rawat and Saurabh George

Respondents: Senior Advocate Gopal Jain; AOR Mithu Jain and Karan Batura; Advocates Abhishek Anand, Karan Kohli, Krishna Sharma, Kunal Godhwani and Kinjal Chadha

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