EPC Construction resolution: Supreme Court rejects Royale’s plea against NCLAT order on cash accruals

New Delhi, November 17: The Supreme Court on Monday rejected the Mauritius-based Royale Partners Investment Fund’s appeal against the NCLAT’s order that upheld the claim of lenders on the cash accruals of EPC Construction India (formerly Essar Projects) during the resolution process.

A Bench led by Justice DY Chandrachud refused to interfere with the NCLAT’s order that dismissed the Royale Partners’ appeal, thus approving the claim of the financial creditors (FCs) on the cash accruals during the resolution process, the Financial Express reported.

The NCLAT in September had upheld the NCLT’s February order that directed that the cash balances of the corporate debtor be paid to the financial creditors till the date of the payment of the upfront consideration, a stand opposed by the Mauritius firm.

The NCLT had approved the resolution plan of Royale Partners after the committee of creditors (CoC) had accepted its Rs 900-crore bid with 73.13% vote share. Banks had taken a haircut of 88%. EPC owed more than Rs 7,700 crore to its financial and operational creditors. However, ArcelorMittal India’s bid was rejected by the CoC.

Royale Partners senior counsel Mukul Rohatgi argued that the effect of the NCLAT order would be that the resolution applicant would be deprived of the cash balances of the corporate debtor amounting to around `209 crore, thus frustrating its resolution plan.

Stating that the NCLAT had misinterpreted the scheme of resolution plan, Royale Partners in its appeal filed through counsel Radhika Gautam, said any payment made under the resolution plan had to be adjusted from the upfront consideration and not in addition to upfront consideration.

The monitoring agency of EPC Construction opposed the Royale Partners’ appeal stating that the contents of the approved RP were clear and unambiguous and “afford no opportunity to the foreign investor to claim otherwise”. “Therefore, no principles of statutory interpretation would come to the aid of Royale Partners, let alone for an RP that it had itself submitted.” Moreover, the conduct of the foreign investor to assert that it was making an endeavour was just to retract from the position it had taken in its plan with regard to appropriation of cash balances.

Counsel Nakul Sachdeva, appearing for the monitoring agency, told FE that the SC “appreciated that after committing to a certain position in the plan; the Royale Partners now seeks to give a different interpretation to the same for appropriating the cash balances that have accrued to the corporate debtor…” The SC also opined about the conduct of Royale Partners, saying that “after committing to implement the plan, it has been filing frivolous litigations and had obtained a stay from a concurrent Bench of the NCLT, Mumbai”, Sachdeva added.

A consortium of banks led by the IDBI Bank had moved the NCLT against EPC Construction in April 2018 after the latter defaulted on loans amounting to Rs 886 crore.

https://www.financialexpress.com/industry/epc-construction-resolution-supreme-court-rejects-royales-plea-against-nclat-order-on-cash-accruals/2129657/