ARSS Infrastructure's assets to be liquidated, orders bankruptcy court

On Tuesday, the bankruptcy court ordered ARSS Infrastructure projects Limited to liquidate its assets on the ground that the resolution plan deprives the dissenting creditor of exercising its right to recover the remaining loan amount from the guarantor even as 76% of lenders approved it.

Kotak Mahindra Bank, which had 0.64% of voting rights in the committee of creditors of ARSS Infrastructure Projects objected to Ocean Capital Markets resolution plan since it would compel them to release third-party guarantees in favour of the resolution applicant without recovering their entire dues.

As per bankruptcy court, the company is unable to repay debt, therefore, they have the right to proceed against the guarantors to recover the remaining loan amount. “This is the prerogative of the financial creditors, in the guise of a resolution plan the said rights of the financial creditors cannot be stripped off against their will,” the Cuttack bench of National Company Law Tribunal said in an order.

“Without making any valuation, the transfer of such guarantees by way of assignment is arbitrary and is beyond the commercial wisdom of the committee of creditors,” the order stated.

“The capital reduction of the existing promoter group to zero is optional and at the sole discretion of the resolution applicant. Hence, this resolution plan is not a definitive one,” the order said.