NCLT Sanctions Resolution Plan u/s 30(6) After NCLAT Upholds Asset Valuation and Creditor Protections u/s 30(2) [Read Order]

An application was filed by Mr. Jalesh Kumar Grover, Resolution Professional (RP) of Trishul Dream Homes Limited, under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 (IBC) read with Rule 11 of the NCLT Rules, 2016 and the CIRP Regulations, seeking approval of the resolution plan submitted by Vashisth Builders and Engineers Limited and Vashisth Estates Limited (SRA), along with an addendum.

The plan had received 91.55% approval of the Committee of Creditors (CoC) in its 10th meeting dated 23.02.2024. The fair value, liquidation value, and plan value were Rs. 68.42 crore, Rs. 61.50 crore, and Rs. 85.92 crore, respectively.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The Corporate Insolvency Resolution Process (CIRP) was initiated on 16.06.2023 following a Section 7 application by Capriso Finance Limited and Siri In Fin Lease Pvt. Ltd., after default on operational debts.

The RP invited Expressions of Interest in Form ‘G’, receiving four proposals, including two from corporate entities and one from an individual/consortium. The plan submitted by Vashisth & Vashisth, being the sole eligible proposal, was placed before the CoC in the 6th meeting and ultimately approved in the 10th meeting.

The Tribunal initially reserved orders on the plan, later rejecting it on 23.04.2025. The Adjudicating Authority cited multiple deficiencies: undervaluation of assets (especially land), non-payment to operational creditors at least equal to liquidation value, non-compliance with Regulation 6A regarding due notice to all creditors, and inappropriate treatment of CIRP costs and PUFE recoveries, which allegedly unfairly burdened unsecured creditors.

It concluded that the plan lacked fairness, transparency, and statutory compliance under Section 30(2) of the IBC.

The RP contended that the plan was approved by an overwhelming majority of 91.55% of CoC, and all statutory requirements under the IBC and CIRP Regulations had been complied with. Notices to creditors were issued through public announcements, and valuation of assets was performed by IBBI-registered valuers. Treatment of CIRP costs and assignment of PUFE recoveries were in line with CoC’s commercial decisions and did not violate statutory provisions.

The NCLT had argued that the plan did not provide fair treatment to all stakeholders, undervalued assets, and failed to ensure operational creditors received at least the liquidation amount. It also observed procedural lapses under Regulation 6A and questioned the allocation of CIRP costs and PUFE recoveries, concluding these deficiencies warranted rejection.

The appeal before NCLAT challenged NCLT’s rejection, emphasising that CoC’s approval reflects commercial wisdom, and judicial intervention is limited to verifying statutory compliance, not second-guessing valuations or commercial decisions.

Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here

The NCLAT, in the Company Appeal, overruled the NCLT’s rejection. It held that the resolution plan complied with Section 30(2) of the IBC and CIRP Regulations. Also pointed out that the asset valuation was conducted by IBBI-registered valuers and cannot be interfered with absent statutory violation.

The Tribunal further observed that the operational creditors were given fair treatment, and payments were aligned with the plan approved by CoC. Also, notices under Regulation 6A and public announcements were sufficient to meet due process requirements. It was also observed that the CIRP costs and PUFE recoveries allocation fell within the commercial wisdom of the CoC.

The appellate Tribunal held that Judicial scrutiny cannot override the commercial decisions of CoC unless specific violations of statutory provisions are proven.

Following NCLAT’s order, the two-member bench comprising Kaushalendra Kumar Singh(Technical Member) and Khetrabasi Biswal (Judicial Member) sanctioned the resolution plan, declaring it binding on the company, creditors, guarantors, employees, statutory authorities, and other stakeholders under Section 31 of the IBC. The RP was directed to implement the plan while complying with company law and other applicable regulations.

The appointment of a monitoring agency, as stipulated in the plan, was also approved.

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates