The National Company Law Tribunal, Mumbai Bench, on 16 June 2025, approved the resolution plan submitted by a consortium for Reliance Naval and Engineering Ltd under Sections 30 and 31 of the Insolvency and Bankruptcy Code, 2016. The approved plan entails a debt haircut of approximately 95 per cent for financial creditors, marking one of the steepest haircuts sanctioned in a major corporate insolvency resolution proceeding.
Background
Reliance Naval and Engineering Ltd, formerly Pipavav Defence and Offshore Engineering Company, was admitted into the corporate insolvency resolution process after defaulting on its financial obligations. The company, which operates one of India's largest private-sector shipyards at Pipavav in Gujarat, had accumulated substantial debt related to defence and offshore vessel construction projects that faced significant cost and time overruns.
The corporate insolvency resolution process had been ongoing for an extended period, with multiple rounds of bidding and negotiations with prospective resolution applicants. The Committee of Creditors evaluated several proposals before approving the consortium's resolution plan by the requisite majority under Section 30(4) of the IBC. The plan was subsequently placed before the NCLT for approval under Section 31.
The Tribunal's approval concludes one of the more closely watched insolvency proceedings in the defence manufacturing sector, given the strategic nature of the shipyard assets and the involvement of significant public-sector lenders.
Key Holdings
The NCLT, while approving the resolution plan, addressed the following:
Plan compliance with Section 30(2): The Tribunal was satisfied that the resolution plan met the statutory requirements under Section 30(2) of the IBC, including provisions for payment to operational creditors in accordance with the statutory minimum, treatment of ongoing litigations, and management of existing employees.
Haircut justification: The approximately 95 per cent haircut for financial creditors was noted by the Tribunal, but the Bench observed that the liquidation value would have been substantially lower, and the resolution plan preserves the corporate debtor as a going concern — consistent with the objectives of the IBC.
Operational creditor treatment: The plan provides for payment to operational creditors in accordance with the priority prescribed under Section 30(2)(b) of the IBC, though the recovery for this class of creditors also remains modest.
Implementation timeline: The resolution applicant consortium is required to implement the approved plan within 180 days, including infusion of the committed equity and assumption of the restructured debt obligations.
Implications for Practitioners
The approval underscores a continuing trend of steep haircuts in IBC resolutions involving capital-intensive industries with distressed asset bases. Practitioners advising financial creditors should note that the Tribunal applied the established principle that even a significantly diluted recovery through resolution is preferable to liquidation where the going-concern value meaningfully exceeds the piecemeal liquidation value.
For insolvency professionals managing similar proceedings in the defence and infrastructure sectors, this order reinforces the importance of demonstrating the comparative analysis between resolution and liquidation outcomes when placing plans before the Committee of Creditors.
Resolution applicants should take note of the 180-day implementation window, which aligns with recent NCLT practice of prescribing firm timelines for plan execution. Delays in implementation may invite applications from creditors seeking to revisit the approved plan or initiate liquidation proceedings.