Resolution Plan Can't Be Rejected On A Perceived Grievance By A Suspended Director Who Failed To Take Steps- NCLT Kolkata

The Applicant, who is the Suspended Member of the Board of Directors of the Corporate Debtor filed an application u/s 60(5) of the Code seeking to set aside the resolution plan proposed by the Resolution Applicant on the ground that the same is undervalued.

CIRP against the Corporate Debtor was initiated in 2019 and Mr. Chhedi Rajbit was appointed as the IRP. The IRP was replaced by the Respondent no. 1 herein and after this appointment, the Applicant did not receive any notice for CoC meetings.

The Applicant then received a notice for handing over the vehicle of the Corporate Debtor. Only when such a notice was received, did the Applicant come to know that the meetings of the CoC were held and that he had not been given notice of the same.

The Applicant also contended that the Corporate Debtor was being sold at an undervalued price of Rs. 3.4 Crores. He contended that sale of the immovable property of the Corporate Debtor could alone fetch approximately Rs. 5 Crores.

Issues

The Tribunal raised the following questions for consideration-

• Whether the Applicant has a locus standi to object against the approval of the Resolution Plan?
• Whether the Adjudicating Authority can interfere with the commercial wisdom of the CoC?

Role Of Board Of Directors Once CIRP Begins

The Tribunal held that after the initiation of CIRP against the Corporate Debtor, the Board of Directors of the Corporate Debtor are suspended and the IRP is vested with the powers of the Board u/s 17(1)(b) of the Code.

The IRP takes over the operations of the Corporate Debtor and manages it for its benefit. The role of Board is then limited to assisting and cooperating with the IRP/RP for smooth resolution of the Corporate Debtor.

The Bench observed-

"But this limited function does not bar the suspended Board of Directors to object the act of the Resolution Professional if the act of the Resolution Professional is prejudicial to the Corporate Debtor, or is in violation of any law or procedural requirement."

Commercial Wisdom Of COC

The Bench reiterated that the Adjudicating Authority is not to interfere with the commercial wisdom of the CoC, as has been laid down in various judgments of the Supreme Court. The Adjudicating Authority is bound to act within the four corners of Section 30(2) of the IBC.

The Tribunal approved the resolution plan of the Resolution Applicants, ARSK Consultants Private Limited and AMPI Finance Private Limited.

With respect to the objection of the Applicant that the Resolution Plan does not maximize the assets of the Corporate Debtor and thus violated the object of the IBC, the Bench observed-

"The Applicant has failed to consider that the object of the Code in totality that is not only to maximise the assets of the Corporate Debtor but the primary objective is to give the Corporate Debtor a new lease of life. That is why the stress is given in reviving the Corporate Debtor as a going concern, if possible and the liquidation followed by the dissolution is supposed to be the last resort."

The NCLT relied on the judgment of the Supreme Court in Ebix Singapore (P) Ltd. v. Committee of Creditors of Educomp Solutions Limited, wherein it was held that inordinate delays cause commercial uncertainty, degradation in the value of the Corporate Debtor and makes the insolvency process inefficient and expensive.

The Tribunal dismissed the application filed by the Applicant and stated that the Resolution Plan has been submitted to revive the Corporate Debtor as a going concern and is in compliance with the Code. A Resolution Plan cannot be rejected based on a perceived grievance by a member of the Suspended Board, who has not taken any steps to participate in the meetings of the CoC.

Case Title: Anand Kariwala Vs. Mr. Partha Pratim Ghosh, Resolution Professional

Counsel for the Applicant: Ms. Swapna Chaubey, Advocate Mr. Sidhartha Sharma, Advocate Ms. Ujjaini Chatterjee, Advocate Ms. Shalini Basu, Advocate

Counsel for the Resolution Professional: Mr. Jishnu Chowdhury, Advocate Ms. Ankita Baid, Advocate Mr. Partha Pratim Ghosh, R.P.

Mr. Chayan Counsel for the CoC: Gupta, Advocate Mr. Ajit Kumar Mishra, Advocate

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