JSA successfully defends PTC India Financial Services Ltd. before the Telangana High Court in a Writ Petition challenging rejection of One Time Settlement Proposals submitted by promoter in relation to the CIRP of the corporate debtor

JSA has successfully advised and represented PTC India Financial Services Ltd. (“PFS”) before the Telangana High Court in a Writ Petition under Article 226 of Constitution of India filed by Mandava Holdings Private Limited (“MHPL/Petitioner”) against – (i) PFS, (ii) Reserve Bank of India and (iii) Rungta Mines Limited (Successful Resolution Applicant). MHPL, being a promoter of NSL Nagapatnam Power and Infratech Limited (“Corporate Debtor”), an entity undergoing Corporate Insolvency Resolution Process (“CIRP”), proposed various One Time Settlement (“OTS”) offers to PFS, which were rejected. Aggrieved by it, MHPL preferred a Writ Petition, seeking a Writ of Mandamus in the nature of a direction that PFS rejected MHPL’s OTS in violation of the Reserve Bank of India Framework for Compromise Settlements and Technical Write-offs dated 8 June 2023 (“RBI Framework”).

The Telangana High Court by Judgment dated 24 December 2024 rejected the Writ Petition (“Judgment”). The High Court’s Judgment assumes significance as it reaffirms the following important principles:

1. Once a resolution plan has been duly approved by the Committee of Creditors (“CoC”), it becomes binding upon all stakeholders, including inter alia the creditors and the resolution applicant, and such resolution plan cannot be withdrawn under Section 12A of the Insolvency and Bankruptcy Code, 2016 (“Code”).
2. Any decision of withdrawal of insolvency application under Section 12A of the Code post the admission of CIRP is subject to the approval of the CoC in the manner prescribed in the said provision.
3. The commercial wisdom of the CoC assumes a position of superiority to all the stakeholders and the CoC itself is bound by its approval of Resolution Plan and cannot be allowed to resile from its decision.
4. The Code is comprehensive and self-contained in nature, and adjudicates all disputes arising out of, or concerning insolvency of a corporate debtor. As such, Writ Jurisdiction of the High Court cannot be invoked under Article 226 of the Constitution of India.

An appeal impugning the Judgment was filed by MHPL before the Division Bench of the Telangana High Court. However, the Divion Bench also disposed of the Appeal against the Judgment and directed MHPL to pursue its remedies before the NCLT Hyderabad, where the CIRP qua the Corporate Debtor is ongoing.

Our Disputes Team comprised Lead Partner, Sidharth Sethi, Partner, Shreya Sircar, and Associate, Kunal Saini.

The matter was argued by Mr. Niranjan Reddy, Senior Advocate, who was assisted by our team.

Matter value – INR 671 crores.

Judgement Date – 24^th December 2024.