NCLT Upholds CoC's Commercial Wisdom, Orders Liquidation of Sasa Musa Sugar Works as Resolution Plans Fail

Sasa Musa Sugar Works Faces Liquidation as NCLT Defers to Creditors' Decision

Kolkata, February 20, 2025 – The National Company Law Tribunal (NCLT) Kolkata Bench, presided over by Hon’ble Member (Judicial) Smt. Bidisha Banerjee and Hon’ble Member (Technical) Shri. Sameer Kakar, has ordered the liquidation of Sasa Musa Sugar Works Private Limited. This decision comes after the Committee of Creditors (CoC) voted in favor of liquidation, finding resolution plans submitted to be unviable. The NCLT, in its order dated February 20, 2025, emphasized the paramount importance of the CoC's commercial wisdom in insolvency resolution processes under the Insolvency and Bankruptcy Code (IBC), 2016.

Background of the Case

The Corporate Insolvency Resolution Process (CIRP) against Sasa Musa Sugar Works was initiated following a petition by the Central Bank of India under Section 7 of the IBC in March 2021, admitted on November 17, 2022. Mr. Kuldeep Verma was appointed as the Resolution Professional (RP). Despite efforts to find a resolution applicant, including multiple invitations for Expression of Interest (EoI), the process ultimately led to the CoC disapproving submitted resolution plans and opting for liquidation.

Two primary resolution plans were considered: one from SJPB Hathua Sugar & Biorefinery Pvt. Ltd. and another from a consortium of Mr. Shahid Ali & Ors., the erstwhile directors of Sasa Musa Sugar Works. While SJPB's plan was initially approved, it was later revoked due to failure to furnish the full Performance Bank Guarantee (PBG). The plan submitted by the consortium of Mr. Shahid Ali & Ors. was also deemed inadequate by the CoC, primarily due to a lower financial offer compared to the liquidation value.

Key Applications and Arguments

Several applications were filed before the NCLT in this matter, all of which were addressed in the common order:

• I.A. (IB) No. 97/KB/2024 & IVN. P. (IB) No. 22/KB/2024: Filed by Mr. Shahid Ali , seeking reconsideration of their resolution plan, renegotiation with the CoC, and a stay on the liquidation proceedings. Mr. Ali argued that liquidation would be detrimental to the company, employees, and sugarcane farmers, and that their resolution plan should be given another chance.
• I.A. (IB) No. 1849/KB/2024: Filed by Central Bank of India, seeking rejection of the revised resolution plan submitted by Mr. Shahid Ali 's consortium, arguing it was non-compliant and financially unviable, and requesting the RP to proceed with liquidation. The bank highlighted discrepancies in the consortium's financial capacity and lack of PBG submission.
• I.A. (IB) No. 2080/KB/2023: Filed by SJPB Sugar and Refinery Private Limited , seeking acceptance of the balance PBG and reinstatement of their Letter of Intent (LoI). SJPB claimed a temporary liquidity crunch and expressed readiness to deposit the remaining amount, arguing revocation of the LoI was detrimental to the CIRP.
• I.A. (IB) No. 1322/KB/2023: Filed by Sugarcane Industries Department, seeking admission of their claim as an operational creditor on behalf of sugarcane farmers.
• I.A. (IB) No. 2046/KB/2023: Filed by the Resolution Professional, seeking an order for liquidation of the Corporate Debtor as per Section 33 of the IBC, following the CoC's decision.
• I.A. (IB) No. 522/KB/2024: Filed by the RP, seeking exclusion of time from the CIRP period to allow further consideration of resolution plans.

Court's Rationale and Decision

The NCLT Bench firmly upheld the CoC's decision to liquidate Sasa Musa Sugar Works, emphasizing the limited scope of judicial intervention in the "commercial wisdom" of the CoC. The Tribunal noted that the CoC, comprising the sole financial creditor, Central Bank of India, had thoroughly deliberated on the resolution plans and found them lacking, especially when compared to the liquidation value of the Corporate Debtor.

The judgment quoted from several Supreme Court precedents to reinforce this principle, including Jaypee Kensington Boulevard Apartments Welfare Association and Ors. vs. NBCC (India) Ltd. and Ors. , which stated, "In the adjudicatory process concerning a resolution plan under IBC, there is no scope for interference with the commercial aspects of the decision of the CoC; and there is no scope for substituting any commercial term of the resolution plan approved by Committee of Creditors."

Further, the judgment highlighted Section 33(2) of the IBC, stating that when the CoC, with the requisite majority, decides to liquidate the corporate debtor, the Adjudicating Authority "shall pass a liquidation order". The NCLT observed that the rejection of both resolution plans was a reasoned decision by the CoC and found no irregularities in the process.

Addressing the concerns raised by Mr. Shahid Ali regarding the impact of liquidation on stakeholders, the NCLT found these arguments to be "purely based on assumptions" without supporting evidence.

The Tribunal also declined to grant further extensions to the CIRP period, citing the time-bound nature of the IBC and referring to the Supreme Court's judgment in State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr. , which cautioned against excessive extensions that could undermine the feasibility of resolution plans.

Final Order and Implications

The NCLT Kolkata Bench passed the following orders:

• Allowed I.A. (IB) No. 2046/KB/2023, ordering the liquidation of Sasa Musa Sugar Works Private Limited and appointed Mr. Manish Jain as the Liquidator.
• Dismissed I.A. (IB) No. 97/KB/2024, IVN. P. (IB) No. 22/KB/2024, I.A. (IB) No. 1849/KB/2024, I.A. (IB) No. 2080/KB/2023, and I.A. (IB) No. 522/KB/2024.
• Disposed of I.A. (IB) No. 1322/KB/2023, granting liberty to the Sugarcane Industries Department to file their claims with the appointed Liquidator.

With the liquidation order in place, the powers of the Board of Directors of Sasa Musa Sugar Works cease to exist and vest in the Liquidator. The liquidation process will now proceed as per the IBC, aiming to realize the assets of the Corporate Debtor and distribute them among stakeholders as per the statutory waterfall mechanism. This marks the end of the CIRP for Sasa Musa Sugar Works and the beginning of its liquidation journey.