The New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) comprising Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member) has held that an application seeking approval of a Resolution Plan cannot be rejected solely due to the withdrawal of consent by one Committee of Creditors (CoC) member without granting the Successful Resolution Applicant (SRA) an opportunity to be heard.
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The appellant, Essar (India) Ltd, argued that the NCLT unilaterally withdrew its assent to the resolution plan by rejecting it by the impugned order dated 09.01.2024, citing Respondent No. 2—State Bank of India—as the only reason. It was also argued that the NCLT had ordered the liquidation of the Corporate Debtor without receiving an application under Section 33(2) of the Code.
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It was argued that in Respondent No. 2’s objection application, the NCLT failed to examine the claims of fraud made against the Appellants. Crucially, the NCLT failed to provide the Appellants a notice, depriving them of the chance to reply to Respondent No. 2’s baseless and biased accusations.
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As per the valuation report, the resolution plan offered a resolution value of Rs. 77.98 crore, while the liquidation value of the Corporate Debtor was only Rs. 23.45 crore. The Tribunal noted that Respondent No. 2’s decision defies commercial logic, and probably for this reason, no other financial creditor supported its position regarding the withdrawal of consent.
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The Tribunal concluded that the impugned ruling is non-speaking and even goes against natural justice principles because the Resolution Applicants, the party whose plan was rejected due to alleged fraud, were never given a chance to defend their position. Furthermore, the impugned order offers no justification for dismissing the appellants’ resolution plan after it has been duly accepted by the Committee of Creditors with a 98.15% majority.
The bench set aside the impugned order and the matter was remanded back to the Adjudicating Authority for fresh consideration.
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