In a recent case, the New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) has held that commercial wisdom of the CoC in approving a resolution plan needs no interference by the Adjudicating Authority unless Plan is violative of Section 30(2) of the Insolvency Bankruptcy Code (IBC), 2016
Yogeshkumar Jashwantilal Thakkar , the two suspended directors of the corporate debtor, Jason Dekor Private Limited, challenged the Order dated 10.05.2024 passed by the adjudicating authority (National Company Law Tribunal) in which approved the resolution plan submitted by Respondent No. 3.
Corporate Insolvency Resolution Process (CIRP) against the corporate debtor commenced on 19.12.2019. The Committee of Creditors (CoC) took a decision to file an Application for Liquidation of the Corporate Debtor there being no viable Resolution Plan. The Respondent No. 3 filed an Application before the Adjudicating Authority seeking direction for consideration of its Plan which was rejected by the Adjudicating Authority on 09.12.2020. iv. Comp. App. was filed by the Respondent No. 3, which Appeal was disposed of by this Tribunal setting aside the Order of the Adjudicating Authority and directing for consideration of Revised Resolution Plan.
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The CoC considered the Resolution Plan of Respondent No. 3 and Resolution Plan along with first Addendum dated 28.12.2020 was considered and was approved on 05.01.2021 with 100% Vote Shares of the CoC. Resolution Professional (RP) filed I.A. for approval of the Resolution Plan. The Adjudicating Authority heard the Parties and vide Impugned Order allowed the Application of RP and approved the Resolution Plan. Adjudicating Authority held that Resolution Plan is compliant of Section 30(2) of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as `The Code’ or `The IBC’) and no substantial grounds have been raised for rejecting the Resolution Plan.
It was argued that various submissions were raised by the Suspended Management including the RP having violated various procedural requirement which have although noticed by the Adjudicating Authority and alledthat there is violation of Regulation 37(ba) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (`The 2016 Regulations’).
It is submitted that the second Addendum dated 02.01.2021 which was submitted by the Resolution Applicant was never placed for voting. It is submitted that Valuation Report which was received by the RP was not shared with the Suspended Management.
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Counsel for the RP stated that RP followed all required process for approval of the Resolution Plan. `Form-H’ has been submitted by RP giving all steps taken in the CIRP. It is submitted that there is no violation of Regulation 37(ba) of the 2016 Regulations since the Clauses pertaining to restructuring of the Corporate Debtor by way of merger amalgamation and demerger is not a mandatory condition to be included in the Plan. Regulation itself provides “as may be necessary” thus the Resolution Plan having no provisions under Regulation 37(ba) of the 2016 Regulations does not violate the provisions of Regulations.
It is submitted that insofar as second Addendum dated 02.01.2021 was concerned, the same was never put for voting and the Plan was approved along with Addendum dated 28.12.2020. It is submitted that Successful Resolution Applicant (SRA) itself has filed an Application for recall of the approved Resolution Plan. SRA has not implemented the Resolution Plan and matter is pending consideration before the Adjudicating Authority. It is submitted that there is no merit in the Appeal, Appeal deserves to be dismissed. It is further submitted that Valuation Reports are required to be shared only with the Member of the CoC in an electronic form on receiving and undertaking to maintain confidentiality.
The appellant in the appeal has not made out any ground to the effect that Resolution Plan submitted by Respondent No. 3 violates any of the provisions of Section 30(2) of the IBC. It is well settled that commercial wisdom of the CoC in approving the resolution plan needs no interference by the Adjudicating Authority/Appellate Tribunal unless the Plan is violative of Section 30(2).
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The Supreme Court in the matter of `K. Sashidhar’ Vs. `Indian Overseas Bank & Ors.’ reported in (2019) has held that legislature has not endowed the Adjudicating Authority with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC.
A two member Justice Ashok Bhushan, Chairperson and Arun Baroka, Member (Technical) viewed that the Valuation Report was shared with the Members of the CoC and no Member of the CoC raised any objection regarding the valuation. The issue of valuation cannot be allowed to be raised by the Appellant at this stage.
Insofar as submission that proceeding by SRA itself has filed an Application for recall of the approval of the Resolution Plan is not the issue which need to be considered in this Appeal. The Appeal is dismissed.
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