NCLAT Quashes NCLT Order Invalidating Resolution Plan, Rules Amrapali Fincap’s Objections u/s 29A Unfounded [Read Order]

The National Company Law Appellate Tribunal (NCLAT) quashed the order of the National Company Law Tribunal (NCLT), New Delhi Bench, observing that the NCLT had erred in holding the successful resolution applicant (SRA) ineligible without any conclusive material to establish disqualification under Section 29A of the Insolvency and BankruptcyCode, 2016 (IBC).

The Appellate Tribunal held that the Adjudicating Authority’s intervention amounted to overstepping the limited scope of judicial review envisaged under the IBC.

The matter arose from the resolution process of JC World Project, wherein JC World Hospitality Pvt Ltd was approved as the successful resolution applicant by the Committee of Creditors (CoC).

The NCLT, while dealing with applications filed by Amrapali Fincap Limited, had declared the promoters of JC World Hospitality ineligible under Section 29A and consequently invalidated the resolution plan. The Adjudicating Authority had relied on findings of alleged defaults and inter-company relationships to hold that the applicant was disqualified from submitting a plan.

Aggrieved, Amrapali Fincap Limited preferred an appeal before the NCLAT challenging the NCLT’s findings on promoter ineligibility, the validity of the CoC’s approval, and the treatment of objections raised during the resolution process.

It was contended before the Appellate Tribunal that the NCLT had wrongly presumed ineligibility without appreciating that JC World Hospitality had no disqualifying connection with any non-performing asset or willful defaulter as contemplated under Section 29A(c) of the IBC.

The appellant argued that the resolution plan was duly evaluated and approved by the CoC, which had verified all documents, financial credentials, and eligibility under the Code. The Adjudicating Authority, it was submitted, had exceeded its jurisdiction by substituting its own assessment in place of the CoC’s commercial wisdom, contrary to settled principles laid down by the Supreme Court in K. Sashidhar v. Indian Overseas Bank and Essar Steel India Ltd v. Satish Kumar Gupta.

The two-member bench comprising Justice Rakesh Kumar (Judicial Member) and Dr. Alok Srivastava (Technical Member) noted that the CoC holds the exclusive authority to assess the feasibility and viability of a resolution plan, while the Adjudicating Authority’s role is limited to verifying compliance with the requirements under Section 30(2) of the Code.

The Bench emphasized that Section 29A disqualification must be based on definite evidence, not mere association with related entities or assumptions of default. In the present case, there was no material on record to establish that JC World Hospitality or its promoters were willful defaulters or ineligible under the Code.

It was further observed that the NCLT had relied on irrelevant considerations and failed to appreciate the due diligence conducted by the Resolution Professional (RP) and the verification carried out by the CoC before plan approval. The Appellate Tribunal clarified that the Adjudicating Authority cannot revisit or re-evaluate the commercial rationale behind a resolution plan once approved by the CoC.

Setting aside the impugned order, the NCLAT held that the NCLT erred in holding the promoters ineligible under Section 29A and invalidating the CoC-approved resolution plan. The Tribunal restored the approval granted to JC World Hospitality Pvt Ltd as the successful resolution applicant for the JC World Project.

The Bench reiterated that judicial interference in commercial decisions of the CoC must remain minimal and confined to procedural compliance, as the IBC framework is designed to ensure timely resolution and finality of decisions made by creditors.

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