Ricoh India Insolvency: High Court Rejects Kotak Investment’s Plea Against Approved Bid

The Bombay High Court rejected Kotak Investment Advisors Ltd.’s petition challenging the insolvency court’s approval for a resolution plan for Ricoh India Ltd., saying the alternative assets manager should approach the appellate tribunal.

Kotak Investment Advisors’ writ petition was not maintainable as the Insolvency and Bankruptcy Code provides an “alternative and efficacious option” to an aggrieved party for filing an appeal with the National Company Law Appellate Tribunal, a divisional bench of the Bombay High Court comprising Justice SC Dharmadhikari and Justice RI Chagla said.

The Kotak Mahindra Group unit moved the high court against the National Company Law Tribunal’s approval to the resolution plan submitted by a consortium of Kalparaj Dharamshi and Rekha Jhunjhunwala. The asset manager argued that the NCLT didn’t hear its objections, violating of principles of natural justice and provisions of the Companies Act, 2013.

The imaging and printing company, which owes financial and operational creditors nearly Rs 2,519 crore, had voluntarily filed for insolvency resolution in January 2018 after alleged fraud and mismanagement. The tribunal admitted its plea in May 2018 and appointed Krishna Chamadia as the resolution professional. Ricoh India’s committee of creditors called for expressions of interest from prospective bidders by August 2018.

The creditor’s committee rejected Kotak Investment Advisors’ offer and approved the plan submitted by the consortium in February last year. A single-member bench of the NCLT comprising judicial member MK Shrawat approved the offer in November.

Why High Court Rejected Petition

The high court dismissed Kotak Investment Advisors’ petition citing:

• Sections 32 and 61 of the insolvency code say that an aggrieved party can approach the NCLAT to file an appeal against an NCLT order approving a resolution plan. It would be “highly unsafe” to allow an appeal in light of the efficacious remedy under these sections. The dispute under the case was factual in nature.
• The high court’s interference could likely scuttle the resolution process of Ricoh India. The scope of high court’s writ jurisdiction does not oblige it to consider appeals against all orders passed by the NCLT. No general rule can be laid down for such a challenge.
• Kotak Investment Advisors can file an appeal in the NCLAT.

Kotak Investment Advisors’ Arguments

Navroz Seervai, counsel appearing for the Kotak Investment Advisors, argued:

• Ricoh India’s committee of creditors erred by approving the resolution plan submitted by the consortium of Dharamshi and Jhunjhunwala as it was the second-highest bid. Kotak Investment Advisors bid was higher.
• Kotak Investment Advisors filed an application at the NCLT against the CoC’s approval. The NCLT, however, went ahead and sanctioned resolution plan without hearing their objections.
• The order was null and void and it diverted from the NCLT rules and principles of natural justice.
• A bench comprising a single judicial had heard the arguments made by the parties, but the final order was passed by a bench comprising of two members. That was contrary to the NCLT rules.

Consortium’s Counter

Janak Dwarkadas, counsel for Dharamshi and Jhunjhunwala, opposed the petition arguing:

• The high court’s powers under Article 226 or 228 of the Constitution cannot be invoked in the present application.
• The NCLT’s record indicate that Kotak Investment Advisors’ advocates were present in the tribunal during all the hearings. It participated and was fully aware of all the proceedings and raised no objection.
• Kotak Investment Advisors failed to approach the division bench of the NCLT or the appellate tribunal. The high court must, therefore, dismiss the writ petition because of the presence of an alternative remedy.