Adjudicating Authority not Empowered to Substitute its own Assumption with CoC's Commercial Wisdom: NCLAT [Read Order]
No power on NCLT to Substitute its own Assumption with CoC's Commercial Wisdom, rules NCLAT
Adjudicating Authority – Empowered – Substitute – Assumption – CoC’s Commercial Wisdom – NCLAT – taxscan
Adjudicating Authority – Empowered – Substitute – Assumption – CoC’s Commercial Wisdom – NCLAT – taxscan
The New Delhi Bench of the National Company Law Appellate Tribunal ( NCLAT ) held that the adjudicating authority not empowered to substitute its own assumption with the Committee of Creditors ( CoC's ) commercial wisdom.
SKS Power Generation Chhattisgarh Limited ( Corporate Debtor ) was admitted into the Corporate Insolvency Resolution Process ( “CIRP” ) and the Resolution Professional ( “RP” ) conducted a negotiation/bidding process to ascertain the highest bidder/commercial bid and the resolution plan by sarda energy and minerals limited ( “SEML” ) was approved by the CoC with a 100% voting.
The NCLT Mumbai observed that there are numerous procedural errors in conducting the negotiation/bidding process and that the CoC's decision is bound to be perverse and not fair being based on incorrect data and sent SEML's Resolution Plan for reconsideration to the CoC. Hence the present appeal was filed.
The Counsel for the Appellant appearing for SEML submitted that the Adjudicating Authority committed an error in passing the Order dated 06.10.2023. It is submitted that the Adjudicating Authority while examining the Resolution Plan is circumscribed by Section 31 of the Insolvency and Bankruptcy Code, 2016, (and legislature has not endowed the Adjudicating Authority with the jurisdiction or authority to analyse or evaluate the commercial wisdom of the CoC.
It was submitted that the Adjudicating Authority is required to evaluate the plan on the touchstone of Section 30(2) read with Section 31 of IBC. Adjudicating Authority is not required to examine the correctness of the decision taken by the CoC, as the decision to approve the Resolution Plan lies solely with the CoC in their commercial wisdom.
A Two-Member Bench comprising Justice Ashok Bhushan, Chairperson and Arun Baroka, Member (Technical) observed that “We have already noticed the judgment of the Supreme Court in M.K. Rajagopalan, where the Supreme Court has observed that commercial wisdom of CoC would come into existence and operation only when all the relevant information is available before it and is duly deliberated upon by all its Members. Thus, in event, all relevant materials are available before the CoC, which is deliberated, no perversity can be imputed in the decision. As noted above, the ground to interfere with the approval of Resolution Plan by the CoC by Adjudicating Authority are circumscribed by virtue of Section 31, sub-section (1). Thus, a fault can be found in the decision only when there is serious error in the decision-making process and by which error, the CoC is unable to take its commercial decision.”
To Read the full text of the Order CLICK HERE
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