Bank of Baroda vs Ujaas Energy Limited & Ors. (SC) (Civil appeal No 6602/2023 17.10.2023

The Hon’ble Supreme Court (‘SC’) upheld the judgement passed by Hon’ble NCLAT, New Delhi in the matter of Bank of Baroda vs. Ujaas Energy Limited & Ors, wherein it was upheld that the decision of the CoC who accepted the relinquishment of personal guarantee (‘PG’) of CD in the Resolution Plan (‘approved plan’).

As per the approved Plan, the SRA proposed a separate payment towards the value of CD being Rs. 45 Crs and Rs. 23.82 Crs towards release of PG. The said PG is to be extinguished after paying due compensation to the Financial Creditors and the same was approved by CoC having vote share of 78.04%.

The approved Plan of Ujaas was rejected by the Hon’ble NCLT on grounds that CoC cannot extinguish right to the particular secured creditor to proceed against the personal guarantor of the CD and opined that such a clause in Resolution Plan contravenes Section 30 (2) (e) of Code even when the said Plan was approved by the majority CoC Members.

Thereafter, the SRA challenged the NCLT Order before Hon’ble NCLAT wherein the Hon’ble NCLAT set aside the NCLT Order and held that the CoC made no error in considering the Resolution Plan and acted well within their Commercial Wisdom and the said commercial wisdom needs to be given its due weightage.

However, the aggrieved Bank of Baroda merely 5.83% voting share challenged the NCLAT Order, however, the Hon’ble SC upheld the judgement of Hon’ble NCLAT.