‘Creditors can’t seek claims beyond okayed resolution plan’
The Hyderabad bench of the National Company Law Tribunal (NCLT) rejected JM Financial ARC’s plea for release of escrow funds in connection with KSK Mahanadi Power’s decision, arguing that ARC had already recovered more than the agreed dues and could not seek refund beyond the approved scheme.
The Board stated that once the resolution plan is approved, all creditor rights against the company will be subject to this plan. He said the creditor cannot later expand his accepted claim or seek relief beyond the treatment provided in the approved plan.
JM Financial ARC argued that it had the right to recover the outstanding balance of ₹583 crore from KSK Mahanadi as the corporate guarantor, despite the agreement with KSK Water Infrastructure, the subsidiary company that supplied water to the power plant.
JM Financial ARC said the withdrawal of bankruptcy proceedings against KSK Water Infrastructure following the settlement revived its contractual rights and allowed it to pursue the remaining debt from KSK.
The court rejected the defense, saying that the issue was not, in principle, whether the creditor could bring a lawsuit against the guarantor after an agreement with the principal debtor.
The narrower question was whether JM Financial ARC could seek further recovery after KSK Mahanadi went through insolvency resolution and its plan was approved and implemented. Last year, JSW Energy acquired KSK Mahanadi for ₹15,985 crore, beating out Adani Power.
The court noted that JM Financial ARC received ₹130 crore as interim distribution during the insolvency process of KSK Water Infrastructure and received ₹925.4 crore under the settlement with that entity, taking its total recovery to ₹1,055.57 crore. This figure exceeds the total claims admitted in KSK Water Infrastructure and KSK Mahanadi, the court said.
