Can Resolution Plan be modified by way of subsequent order of adjudicating authority relating to interconnected matter of Resolution Plan?

SREI Multiple Asset Investment Trust Vision India Fund (Appellant) preferred an appeal against decision of Hon’ble National Company Law Appellate Tribunal (NCLAT) which set-aside order of Hon’ble NCLT (National Company Law Tribunal) Hyderabad Bench which have the effect of modification/alteration of approved Resolution Plan of the Corporate Debtor – Deccan Chronicle Holdings Ltd. (DCHL).

Facts of the case: –

1. Appellant is the Successful Resolution applicant (SRA) of the Corporate Debtor (CD), whose Resolution Plan was approved by the Committee of Creditors (CoC) of the Corporate Debtor with 81.39% voting share which was conditionally approved (subject to condition in reference to the rights over the brand name/trademarks of the Corporate Debtor) by the Hon’ble NCLT by order dated 3^rd June 2019.
2. Corporate Debtor has been into the business of printing, publication, and sale of daily newspapers under the trade names, “Deccan Chronicle” (English) and “Andhra Bhoomi” (Telugu) (hereinafter referred to as the “Trademarks”).
3. There was pending application with respect to the brand name of the Corporate Debtor, application I.A. No.155 of 2018 seeking a declaration by the Corporate Debtor that it is the owner of the trademarks (“Deccan Chronicle” and “Andhra Bhoomi”) and the said trademarks be treated as part of the assets of the Corporate Debtor.
4. On 14^th August 2019, Hon’ble NCLT held that the Resolution Professional has established that it is the Corporate Debtor/DCHL who has an exclusive right to use the trademarks “Deccan Chronicle” and “Andhra Bhoomi” and also made a declaration that the trademarks (“Deccan Chronicle” and “Andhra Bhoomi”) belong to the Corporate Debtor/DCHL).

Deccan Chronicle Marketeers (Respondent) in the present case challenged order of Hon’ble NCLT Order dated 14^th August 2019 before Hon’ble National Company Law Appellate Tribunal (NCLAT).

Hon’ble NCLAT Set-aside order of Hon’ble NCLT on following grounds: –

Declaration made by the NCLT holding the ownership rights of the Corporate Debtor over the trademarks “Deccan Chronicle” and “Andhra Bhoomi” amount to a modification/alteration of the approved Resolution Plan by CoC, which is impermissible in law and held that the order of the NCLT (adjudicating authority), in fact, has transgressed its jurisdiction.

Grounds of Appeal by Appellant before Hon’ble Supreme Court: –

1. Hon’ble NCLAT has misinterpreted Clause 4.3 and Clause 11.12 of the Resolution Plan which categorically state that the appellant holds unfettered and exclusive rights to the trademarks without any financial implications and with these unforeseen commercial consequences if it only reserves the right to use the trademarks, the Resolution Plan is a non-starter.
2. The NCLT under its order has approved the Resolution Plan by 81.39% of the voting of CoC and the finding recorded by the NCLAT that it amounts to alteration of the conditions of approved Resolution Plan is misconceived.
3. Appellant also Placed certain minutes of CoC to justify that what being decided by the adjudicating authority while disposing of I.A. No.155 of 2018 is nothing but approving the Resolution Plan, which in no manner tantamount to alteration/modification of Clause 11.12 of the Plan.

Reply by Respondent:-

1. Resolution Plan, particularly, with reference to the right to trademarks was only confined to the perpetual exclusive right to use the trademarks, namely, “Deccan Chronicle” and “Andhra Bhoomi” without any financial implications for the purpose of running its business, while disposing of I.A. No.155 of 2018 by the NCLT, it has altered/modified the Resolution Plan already approved, which was not within its jurisdiction and Section 60(5) or Section 238 of the IBC do not permit the adjudicating authority to decide the issue in respect to ownership of trademarks and since declaration of ownership over the trademarks was approved by the adjudicating authority, it is impermissible in law.
2. Also placed reliance on Judgement of Embassy Property Developments Private Limited v. State of Karnataka and Others.

Hon’ble Supreme Court upheld decision of Hon’ble NCLAT on Following grounds: –

For the purpose of determination of rights with respect to Brand Name as per Resolution Plan, below is a Relevant extract of Details under clause Clauses 4 (Brands of the Corporate Debtor) and 11.12 of Resolution Plan.

Clause 4 Brands of the Corporate Debtor

4.1 The Corporate Debtor as of now use the following brands/trademarks for running its business: –

• Deccan Chronicle
• Andhra Bhoomi
• The Asian Age
• Financial Chronicle
• Deccan Chargers; and
• Odyssey

In order to keep the Corporate Debtor as a viable going concern, it is of utmost importance that all the 6 (six) brands as afore stated, can be used freely by the Corporate Debtor without any hindrance, limitation, restrictions, impediments, demur, and obstruction of any nature whatsoever. In order to achieve the same, the above Financial Creditors shall be deemed to have released their right under the relevant security documents with respect to the said brands in favour of the Resolution Applicant on and from the date the above Financial Creditors stand paid in terms of Clause 3 of this Resolution Plan, in consideration of the settlement arrived at by virtue of this Resolution Plan.

Clause 11.12 of the Resolution Plan: –

1. Adjudicating Authority to pass necessary order/give appropriate directions to give effect that the corporate debtor has the perpetual exclusive right to use the brands namely (i) Deccan Chronicles; (ii) Andhra Bhoomi; (iii) The Asian Age; (iv) Financial Chronicle; (v) Deccan Chargers; AND (vi) Odyssey without any financial implications for the purposes of running its business.
2. This clause 11.12 refers that it is confined to the perpetual exclusive right to use the brands i.e., “Deccan Chronicle” and “Andhra Bhoomi,” etc. by the Corporate Debtor. and it nowhere indicates regarding the right of ownership over the trademarks/brands.
3. NCLT Order dated 14^th August 2019, was a modification/alteration in the approved Resolution Plan which indisputably is impermissible in law.
4. The residual powers of the adjudicating authority under IBC cannot be exercised to create procedural remedies which have substantive outcomes on the process of insolvency. The framework, as it stands, only enables withdrawals from the CIRP process by following the procedure detailed in Section 12A IBC and Regulation 30A of the CIRP Regulations and in the situations recognised in those provisions (Reference -: – Hon’ble Supreme Court Judgment in the matter of Ebix Singapore Private Limited vs. Committee of Creditors of  Educomp   Solutions   Limited   & Another).
5. If the legislature in its wisdom, were to recognise the concept of withdrawals or modifications to a resolution plan after it has been submitted to the adjudicating authority, it must specifically provide for a tether under IBC and/or the Regulations. (Reference -: – Hon’ble Supreme Court Judgment in the matter of Ebix  Singapore  Private  Limited vs. Committee of  Creditors of   Educomp   Solutions   Limited   & Another).
6. In terms of the approved Resolution Plan, it was the perpetual exclusive right to use the brands,   namely, “Deccan Chronicle” and “Andhra Bhoomi”, by the Corporate Debtor which were available to the appellant herein and once it has been approved by the adjudicating authority, certainly the right to exclusive use of the trademarks belonging to the Corporate Debtor, on being approved by the adjudicating authority, is always available to the appellant, but not the ownership rights of the trademarks of the Corporate Debtor.

Conclusion: –

The oversight of the SRA has led to a situation where SRA prayed for the ownership of the trademarks since they have established to Hon’ble NCLT that corporate debtor has exclusive right only to use the trademarks. Thus, it can be concluded that subsequent order of Adjudicating Authority on matter interlinked with Resolution Plan be treated as Modification of Resolution Plan, which is not permissible under IBC. 

Although there is no operational hindrance in using the trademarks there definitely may be commercial ones for the SRA. Any plans for a turnaround of the company now lies with the understanding of SRA and the respondent.