New Delhi: Opening up a new window for promoters looking to retain control of their companies facing bankruptcy proceedings, the National Company Law Appellate Tribunal (NCLAT) has held that shareholders and owners can reach a settlement with the creditors when their entity is under liquidation and an official liquidator has been appointed by the insolvency court.
In the liquidation case pertaining to Sterling Biotech, the NCLAT has set aside a bankruptcy court order to liquidate a debt-ridden company while allowing its promoters to take back control of the firm after making full payment to the lenders.
The ruling may set a precedent that will have ramifications for companies willing to clear dues after they are admitted for insolvency resolution. In one such case, promoters of insolvent Essar Steel have expressed their willingness to take back its company after settling in full all debt.
However, the matter is still pending in the bankruptcy court after a prolonged legal battle and ArcelorMittal's successful resolution proposal for Essar Steel is awaiting the final order.
It was reported that promoters who are barred from the resolution process of insolvent companies may get a chance to regain control after settling dues at the liquidation stage.
The Insolvency and Bankruptsy Code (IBC) also provides for taking a company out of the resolution process after admission if 90% of the creditors agree to it.
In a Sterling Biotech oral order given last week, a three-member NCLAT bench set aside the May 8 order of the National Company Law Tribunal's (NCLT) Mumbai bench and allowed the withdrawal of a petition filed under Section 7 of the Insolvency and Bankruptcy Code (IBC).
