NCLAT Upholds NCLT Rejection of ₹1.15 Cr CIRP Plan Over Low Value & Avoidance Transaction Breaches [Read Order]

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has upheld the NCLT’s rejection of a ₹1.15‑crore resolution plan, citing severe breaches in the handling of avoidance transactions and non‑compliance with IBBI regulations. The appellate bench found that the plan, valued at barely 10% of the corporate debtor’s liquidation value, was approved by the Committee of Creditors without full disclosure of preferential and fraudulent transactions worth over ₹83 crore.

The appeals were filed by Sandeep Lucky, the Successful Resolution Applicant (SRA), and Parminder Singh Bhullar, the erstwhile Resolution Professional (RP). The Adjudicating Authority had earlier rejected the plan approved by the Committee of Creditors (CoC) with 100% voting share, removed the RP, and directed a re‑run of the CIRP to be completed within 120 days, failing which the corporate debtor would stand deemed liquidated.

The tribunal noted that the resolution plan value was only 10% of the liquidation value, and that the RP failed to comply with mandatory provisions under Regulations 35A, 36(4A), and 38(2) of the IBBI (CIRP) Regulations, 2016.

The tribunal observed that avoidance applications under Sections 43 and 66 of the Insolvency andBankruptcy Code (IBC) were filed only after the CoC’s approval of the plan, contrary to the RP’s statutory duty to file them within the prescribed timeline.

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The NCLAT recorded that the transaction auditor had identified preferential transactions worth ₹6.62 crore and fraudulent transactions amounting to ₹76.46 crore, yet these findings were not properly placed before the CoC. The resolution plan’s clause allowing the SRA to pursue avoidance recoveries and share proceeds 50:50 with creditors was held to be in violation of Section 36(3)(f) of the Code, which mandates that such recoveries constitute assets of the corporate debtor.

Rejecting the appellants’ contention that the CoC’s commercial wisdom is non‑justiciable, the Bench comprising Justice Mohd. Faiz Alam Khan (Judicial Member) and Arun Baroka (Technical Member) held that the process “was not conducted transparently and fairly and violated the provisions of the Code and related Regulations.”

The Tribunal also directed the Insolvency and Bankruptcy Board of India (IBBI) to investigate the conduct of the erstwhile RP, noting irregularities in performance security collection and non‑disclosure of avoidance transactions in the Information Memorandum.

Accordingly, both appeals were dismissed, and all related interlocutory applications disposed of, with no order as to costs.

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