The National Company Law Appellate Tribunal (NCLAT) has rejected an appeal filed by Navayuga Engineering Company Ltd, which had challenged the lenders’ decision to disqualify it from bidding for the 1,750 MW Athena Demwe Power Ltd on the Lohit river in Arunachal Pradesh.
The Lower Demwe hydroelectric project, which is perceived to be of great strategic and national importance, has been in development since 2009. It was granted environmental clearance in 2010 but was delayed due to pending forest clearances.
Originally, Navayuga Engineering. through its wholly owned subsidiary Regina Infrastructure Pvt Ltd (RIPL), had invested ₹235.35 crore and held 21.55% in the company. The company had also signed a memorandum of understanding (MoU) with the promoters of Athena Demwe Power to eventually acquire a controlling stake of 51% through further infusion of funds. However, in September 2017, Athena Demwe Power was admitted for insolvency resolution following an application filed by the Indian Bank. The company’s total admitted liabilities are of ₹566 crore.
The genesis of the dispute lies in the lenders’ decision to disqualify Navayuga Engineering as a resolution applicant under Section 29A of the Insolvency and Bankruptcy Code (IBC). Subsequently, the company approached the National Company Law Tribunal to challenge the decision of the committee of creditors (CoC) to disqualify the company.
In 2018, the government introduced Section 29A, which disqualifies defaulting promoters and connected entities from bidding for their own companies.
On May 26 last year, the tribunal upheld the CoC’s decision of Navayuga Engineering’s disqualification, after which the company approached the appellate tribunal.
Before the appellate tribunal’s order, the company’s resolution professional (RP) Umesh Garg, through his counsels NPS Chawla and Sujoy Datta of law firm Aekom Legal, argued that Navayuga Engineering was exercising control over the corporate debtor (Athena Demwe Power) through RIPL, which held 21.55% equity shares in the corporate debtor.
Navayuga Engineering had invested ₹236 crore for a 21.55% stake through wholly owned subsidiary RIPL and it was in a position to invest an additional ₹730 crore for an additional stake.
A revival plan submitted by Sikkim Power Investment Corporation Ltd has already been approved by the CoC of the company and is pending the tribunal’s approval. Besides, the Union power ministry-controlled THDC India Ltd and the state of Arunachal Pradesh have approached the tribunal, seeking an opportunity to submit their revival plans for the company.
“Even if the appellant was not the promoter of the corporate debtor since inception, after the execution of the MoU… the appellant was given control and management of the corporate debtor,” the division bench of chairperson Justice Ashok Bhushan and technical member Barun Mitra said in its order of February 16. “We do not find any error in the order passed by the adjudicating authority (NCLT) warranting interference by us in this appeal.”
Source: Economic Times