Approval of Resolution Plan below Liquidation Value is within Commercial Wisdom of CoC: NCLAT [Read Order]
The approval of Resolution Plan below Liquidation Value is within Commercial Wisdom of CoC, rules NCLAT
NCLAT – NCLAT Chennai – NCLAT judgment on resolution plan – Resolution plan – Commercial wisdom – Committee of creditors – Coc commercial wisdom – TAXSCAN
NCLAT – NCLAT Chennai – NCLAT judgment on resolution plan – Resolution plan – Commercial wisdom – Committee of creditors – Coc commercial wisdom – TAXSCAN
The Chennai Bench of the National Company Law Appellate Tribunal ( NCLAT ) observed that the approval of the resolution plan below the liquidation value is within the commercial wisdom of the Committee of Creditors ( CoC ).
The appeal was preferred by the Resolution Professional ( RP ) on 17.07.2023 seeking approval of the Resolution Plan which was approved by the Committee of Creditors ( CoC ) with a 100 % voting share in its 12th meeting which was held on 26.06.2023. The Adjudicating Authority, while allowing the Application observed that the Resolution Plan was in accordance with Sections 30 & 31 of the Code and that it also complies with Regulations 38 & 39 of the IBBI ( Insolvency Resolution Process for Corporate Persons ) Regulations, 2016.
The counsel for the appellant submitted that the CoC was illegally constituted without including Edelweiss Asset Reconstruction Company ( EARCL ), which was the assignee of the debt from Federal Bank on 10.12.2012, enjoying a charge of Rs. 5.21 Crores plus interest in relation to a Corporate Guarantee from the Corporate Debtor in favour of the debt availed by another group Company, namely Orient Extraction Pvt. Ltd.
It was submitted that neither Edelweiss nor Federal Bank had filed a Claim with the RP. It is contended that had Edelweiss been included in the CoC, it would have constituted 80% of the voting share and even though Edelweiss did not submit its claim, the ( Resolution Professional ) was duty bound to inform Edelweiss about the pendency of the CIRP proceedings.
It was the main case of the Second Respondent / the Successful Resolution Applicant ( SRA ) that the Appellant has no locus to challenge the Order of the approval of the Resolution Plan as the Appellant is the suspended Director whose locus ends once the affairs of the Corporate Debtor are handed over to the IRP.
A Two-Member Bench comprising Justice Rakesh Kumar Jain, Member ( Judicial ) and Shreesha Merla, Member ( Technical ) observed that “In the instant case, the approval of the Resolution Plan below the Liquidation value is within the commercial wisdom of the CoC as the Code does not expressly bar that the Resolution Plan value should be over and above the Liquidation value. Hence, there is no material irregularity. As regarding the contention of the Counsel for the Appellant that the Operational Creditor Kerala Ayurvedic Limited was getting an amount lower than the Liquidation value and hence the Plan is discriminatory is untenable, keeping in view that the very same Operational Creditor had voluntarily agreed to accept an amount lower than the Liquidation value.”
To Read the full text of the Order CLICK HERE
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