NCLT Mumbai Approves Resolution Plan Of Arainfra Projects For Megi Agro Chem; Existing Shareholding Extinguished

The National Company Law Tribunal, Mumbai Bench (Court-V) has approved the resolution plan submitted by Arainfra Projects Private Limited for Megi Agro Chem Limited, under Section 31 of the Insolvency and Bankruptcy Code, 2016.

Background

The Corporate Insolvency Resolution Process (CIRP) against Megi Agro Chem Limited was initiated on 5 August 2022 on an application filed by Pridhvi Asset Reconstruction and Securitisation Company Limited, the sole financial creditor, with admitted claims of approximately ₹1,629 crore. After multiple rounds of Expressions of Interest and an aborted liquidation attempt, a revised Form-G issued in July 2023 resulted in Arainfra Projects Private Limited submitting a resolution plan, which was approved by the Committee of Creditors with 100% voting share at its 12th meeting held on 21 September 2023.

Resolution Plan

The approved plan provides for an infusion of ₹17.51 crore, funded through equity/quasi-equity/debt, towards settlement of stakeholder claims. Secured financial creditors are to receive approximately 10.73% of their admitted dues, while statutory operational creditor dues (EPFO) of ₹2.54 lakh are to be paid in full pursuant to an addendum approved by the CoC. The plan also contemplates payment of CIRP costs in priority and furnishes a performance bank guarantee of ₹5 crore.

Findings

Relying on the Supreme Court’s decision in K Sashidhar v. Indian Overseas Bank, the Tribunal reiterated that judicial review of a resolution plan is limited to statutory compliance and that the commercial wisdom of the CoC is paramount. The Bench held that upon approval of the plan, all existing equity shares of Megi Agro Chem Limited stand extinguished, with new shares to be issued to the successful resolution applicant. Claims not forming part of the resolution plan were declared extinguished in terms of Section 31 and Section 32A of the IBC, read with Ghanshyam Mishra & Sons v. Edelweiss ARC.

The moratorium under Section 14 was lifted with immediate effect.