Unsuccessful Resolution Applicant Has No Locus Standi To Challenge The Approved Resolution Plan: NCLAT Chennai

Background Facts

Vasan Health Care Pvt. Ltd. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”). ASG Hospital Private Ltd. (“Successful Resolution Applicant/SRA”) submitted a Resolution Plan for the Corporate Debtor which was approved by the Committee of Creditors (“CoC”). Subsequently, the Resolution Plan was approved by the Adjudicating Authority on 03.02.2023 and the plan was implemented by the SRA.

Mr. M.K. Rajagopalan (“Appellant/Unsuccessful Resolution Applicant”) being one of the Prospective Resolution Applicants whose plan could not be approved, filed an appeal before NCLAT against the order dated 03.02.2023. The Appellant argued that he has suffered at the behest of the resolution process and has a vested interest in pursuing the appeal.

The Resolution Professional argued that an Unsuccessful Resolution Applicant has no locus standi to question the approval of SRA’s Resolution Plan by the Adjudicating Authority. Additionally, the Appellant neither being covered under the meaning of Stakeholder under Section 31(1) of IBC nor being privy to the Resolution Plan, cannot claim himself to be an aggrieved party.

The SRA argued that the Appellant subjected himself to the very process of revision of the Resolution Plan and had participated in the process. Therefore, he could not have taken a contrary stand later to claim that the process of selection of Resolution Plan was unfair.

Relevant Law

Section 31(1) of IBC

“Section 31. Approval of Resolution Plan

31. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve3 the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan.”

NCLAT Verdict

The Bench opined that the CIRP of the Corporate Debtor ended on 10.03.2022, hence, the Appellant’s attempt to rewind the entire process and to vote on its Resolution Plan again is impermissible.

On the issue of locus standi, it was observed as under:

“On a careful consideration of the respective contentions advanced on either side, this `Tribunal’, keeping in mind of a vital fact that the `Petitioner / Appellant’, being an `Unsuccessful Resolution Applicant’, has no `Locus’, to `assail’ a `Resolution Plan’ or its `implementation’, coupled with a candid fact that he is not a `Stakeholder’, as per Section 31 (1) of the I & B Code, 2016, in relation to the `Corporate Debtor’, this `Tribunal’, without any `haziness’, holds that the `Petitioner / Appellant’, is not an `Aggrieved Person’, coming within the ambit of Section 61 (1) of the I & B Code, 2016, especially, when he is not a `Privy’, to the `Resolution Plan’.”

The Bench held that the Unsuccessful Resolution Applicant has no locus standi to assail a Resolution Plan or its implementation since it is not a stakeholder as per Section 31(1) of IBC and hence not an aggrieved party.

The appeal has been dismissed.

Case Title: M.K. Rajagopalan v S. Rajendran & Anr.

Case No.: Company Appeal (AT) (CH) (INS) No. 58 of 2023

Counsel for Appellant: Mr. P.H. Arvindh Pandian, Senior Advocate, Mr. K. Chandramohan, Advocate.

Counsel for Respondents: Mr. Krishnan Venugopal, Senior Advocate, Ms. Elamathi, Advocate, Mr. S. Rajendiran, Erstwhile RP, Mr. Kaushik Ramaswamy, Advocate.

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