NCLT Approves Resolution Plan for HBS Auto & ANC SEZ, Paving Way for Revival Under Consortium - 2025-03-13

Laws, Courts & Judgments.

NCLT Greenlights Resolution Plan for HBS Auto & ANC SEZ, Consortium to Take Over

Mumbai, India – In a significant development for corporate insolvency resolution, the National Company Law Tribunal (NCLT) has approved a resolution plan for HBS Auto & ANC SEZ Private Limited , a real estate development company undergoing Corporate Insolvency Resolution Process (CIRP). The order, pronounced on March 12, 2025, by a bench comprising Hon’ble Member (Judicial) Justice Virendrasingh G. Bisht (Retd.) and Hon’ble Member (Technical) Sh. Prabhat Kumar, marks a crucial step towards the revival of the Corporate Debtor.

Background of the Case

The CIRP was initiated against HBS Auto & ANC SEZ following an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by SREI Equipment Finance Ltd., the Financial Creditor. The application was admitted on January 2, 2024, and Mr. Avinash Ambikaprasad Shukla was appointed as the Resolution Professional (RP). Subsequently, a Committee of Creditors (CoC) was constituted, and efforts were made to invite resolution plans to rescue the financially distressed company.

After multiple rounds of Expression of Interest and extensions, a resolution plan submitted by a Consortium of M/s Mahansaria Tyres Pvt. Ltd. and M/s. Lotus Ornaments Pvt. Ltd. (Successful Resolution Applicant - SRA) was ultimately approved by 100% of the CoC members in their 16th meeting held on January 24, 2025. The RP then filed an application with the NCLT under Sections 30(6) and 31 of the IBC, seeking approval of this resolution plan.

Salient Features of the Approved Resolution Plan

The approved Resolution Plan proposes a total consideration of ₹47.08 Crores, aiming to address the claims of various creditors. Key aspects of the plan include:

• Financial Proposal: Secured Financial Creditors, with admitted claims of ₹108.95 Crores, are offered ₹46.00 Crores. Operational Creditors, including workmen, employees, and government dues, are proposed to be paid in full. However, Unsecured Financial Creditors and Other Creditors are proposed to receive NIL amount against their admitted claims.
• Funding: The SRA will fund the resolution through a combination of equity contribution (₹1 Crore) and debt instruments (₹46.58 Crores).
• Implementation Timeline: All payments under the plan are to be made within 90 days from the Effective Date (date of NCLT approval).
• Operational Restructuring: The plan outlines operational improvements focusing on enhancing productivity, leveraging unutilized assets, and addressing working capital needs.
• Statutory Compliance: The plan emphasizes compliance with Section 30(2) of the IBC and Regulation 38 of the CIRP Regulations, ensuring the interests of all stakeholders are addressed and that statutory requirements are met.
• Reliefs and Concessions: The Resolution Applicants sought various reliefs and concessions, particularly related to leasehold rights, SEZ approvals, and tax matters, aimed at ensuring smooth implementation and protecting the Corporate Debtor from legacy liabilities. These were considered by the NCLT and granted with certain conditions and subject to applicable laws.

NCLT's Observations and Decision

The NCLT meticulously reviewed the Resolution Plan, relying on the RP's Compliance Certificate (Form-H) and affidavits, to ensure it met all statutory requirements under Section 30(2) of the IBC and related regulations. The Tribunal noted the 100% approval from the CoC and referred to the Hon’ble Supreme Court’s judgments in K. Sashidhar v. Indian Overseas Bank & Others and Ghanshyam Mishra and Sons Private Limited v/s. Edelweiss Asset Reconstruction Company Limited to underscore the limited scope of judicial intervention once the CoC approves a plan.

The bench observed that the Resolution Plan adequately addressed the payment of CIRP costs, operational creditor debts, and provided for the management and supervision of the Corporate Debtor post-resolution, thus fulfilling the criteria under the IBC.

Regarding the reliefs and concessions sought, the NCLT referenced the Ghanshyam Mishra judgment, affirming that while the resolution plan is binding and extinguishes claims not part of it, statutory obligations and waivers require approval from relevant authorities. The NCLT granted certain reliefs with specific limitations, ensuring adherence to existing legal frameworks and regulations, particularly concerning leasehold rights, SEZ approvals, and statutory compliances.

Key Excerpts from the Order:

The order reiterated the binding nature of an approved resolution plan, quoting from the Ghanshyam Mishra judgment:

> “Once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of the resolution plan shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan...”

Conclusion

Ultimately, finding the Resolution Plan to be compliant with Section 30(2) of the IBC and other relevant regulations, the NCLT approved the plan. The approval is effective from March 12, 2025, and is binding on all stakeholders, including the Corporate Debtor, its creditors, employees, and government authorities. The moratorium under Section 14 of the IBC has ceased, and the Resolution Professional is directed to supervise the implementation of the plan and file periodic status reports with the NCLT.

This decision offers a pathway for the revival of HBS Auto & ANC SEZ under new management, providing relief to secured creditors and ensuring payment to operational creditors, while setting a precedent for resolution plan approvals under the IBC framework.