Resolution Plan Can Be Approved Beyond 330-Day Time Limit If There Are Valid Grounds For Extension: NCLAT New Delhi

Background

The Adjudicating Authority admitted the application for initiation of the CIRP of the corporate debtor and IRP was appointed. CoC of two Secured Financial Creditor and two Unsecured Financial Creditor was formed by the IRP. As 180 days period of the CIRP expired, the Resolution Professional (RP) moved an application before the Adjudicating Authority to get a 90 days extension, which was allowed by the NCLT. Subsequently, two more extensions were sought by the by the RP which resulted in exceeding the 330 days limitation period. The Adjudicating Authority approved the submitted resolution plan, aggrieved by which the Appellant-Operational Creditor preferred an appeal before the NCLAT.

The appellant contended that the resolution plan was approved after the limitation period of 330 days, hence should be considered invalid. The appellant also highlighted the procedural flaw during the CIRP, particularly the non- sharing of the detailed valuation reports. Finally, the appellant contended that the resolution plan did not conform to Section 30(2)(b) of the IBC, as the operational creditors were not allocated amounts consistent with the liquidation value.

NCLAT's Judgment

The NCLAT ruled that the approval of the resolution plan beyond 330-day limit is valid, as the extension has been sought in the advanced stage of the process. While discussing the judgment of Hon'ble Supreme Court in the case of Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, the tribunal held that the judgment does not rule out the possibility of extending the CIRP timelines in specific cases, especially when a short time remained for completion. Hence, the extension of the time was within the permissible boundaries under the IBC.

While discussing the issue of non-sharing of valuation report with the appellant, the bench said that it is immaterial whether the report was presented to the appellant or not, since the appellant had no voting rights in the CoC meeting. Therefore, they cannot be said to have suffered any prejudice.

The NCLAT held that the law is now well settled and interference in the resolution plan by the Adjudicating Authority can only be done to the limited extent. The bench said that the scope of judicial review is confined to the provisions contained in Section 30(2) of the IBC for the Adjudicating Authority and Section 30(2) read with Section 61(3) for the Appellate Authority.

While discussing the supremacy of the commercial wisdom of CoC reference was made to the rulings of K. Sashidhar v. Indian Overseas Bank; Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta; Maharashtra Seamless Limited v. Padmanabhan Venkatesh; Kalpraj Dharamshi v. Kotak Investment Advisors Limited, and Ghanashyam Mishra and Sons Private Limited through the Authorized Signatory v. Edelweiss Asset Reconstruction Company Limited through the Director, and it was held that it is the commercial wisdom of the CoC to negotiate and accept the resolution plan. Adjudicating Authority cannot substitute its views with the commercial wisdom of the CoC nor deal with the merits of Resolution Plan unless it is found it to be contrary to the express provisions of law and against the public interest.

Case Title: M/s Riddhi Siddhi Gluco Biols Ltd. v. Sunit Jagdishchandra Shah

Case Number: Company Appeal (AT) (Insolvency) No. 187 of 2025

Tribunal: National Company Law Appellate Tribunal, Principal Bench, New Delhi

Judge: Justice Ashok Bhushan (Chairperson), Barun Mitra (Member (Technical)), and Arun Baroka (Member (Technical))

For Appellant: Mr. Ajay Kumar Tiwari, Advocate

For Respondent: Ms. Honey Satpal, Mr. Nipun Singhvi, Ms. Pooja Singh, Advocates for Erstwhile RP

Date of Judgement: 07.03.2025

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