When COC Approves A Resolution Plan, It Is Presumed To Be Viable And Feasible: NCLAT Delhi
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Kanthi Narahari (Judicial Member) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Rajesh Kumar & Ors. v Rabindra Kumar Mintri & Anr., has held that when the Committee of Creditors (CoC) approves a Resolution Plan in...
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Kanthi Narahari (Judicial Member) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Rajesh Kumar & Ors. v Rabindra Kumar Mintri & Anr., has held that when the Committee of Creditors (CoC) approves a Resolution Plan in its commercial wisdom, it is presumed that the Resolution Plan is viable and feasible.
Background Facts
Today Homes Noida Private Limited (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”). Mr. Sunil Kumar Jain alongwith Mr. Apoorv Jain (“Resolution Applicants”) had submitted a Resolution Plan for the Corporate Debtor, through their consortium name One Group. The said Resolution Plan was put to vote before the Committee of Creditors (“CoC”) and 1053 home buyers which were represented by their Authorized representative. The Resolution Plan was approved by the CoC with 100% votes.
Subsequently, the 68 home buyers filed an application before the Adjudicating Authority seeking rejection of the approved Resolution Plan and replacement of the Resolution Professional. The 68 Homebuyers opposed the approved Resolution Plan upon the premise that there were procedural irregularities in the proceedings of CoC.
On 26.09.2022, the Adjudicating Authority dismissed the application while relying on the NCLAT judgment in Priya Puri & Ors. v Mr. Debhashish Nanda & Ors., CA (AT) (Ins) No. 906/2022, wherein it was held that when homebuyers as a class have assented to the plan, any individual homebuyer or association cannot challenge the plan. The Homebuyers challenged the Order dated 26.09.2022 before NCLAT.
Contentions Of Appellant
The Homebuyers argued that their Authorized Representative had not obtained their instructions and approval with regard to different items of the Agenda. In the 6th CoC meeting several items were deferred without obtaining any opinion of the homebuyers, which vitiated the entire process. Further, no opinion was sought from the homebuyers with respect to the feasibility and viability of the Resolution Plan, despite the CoC having resolved to seek such opinion.
NCLAT Verdict
The Bench observed that the judgment of Priya Puri & Ors. vs. Mr. Debhashish Nanda & Ors., being relied upon by the Adjudicating Authority, pertained to one set of homebuyers challenging the various procedures adopted while approving the Resolution Plan.
The Bench placed reliance on the Supreme Court judgment in Jaypee Kensington Boulevard Apartments Welfare Association and Ord. vs. NBVV (India) Ltd. and Ors., (2021) 1 SCC 401, wherein it was held that the democratic principles of the determinative role of majority opinion have been duly incorporated in IBC and the minority homebuyers have to necessarily sail with the majority within the class.
The Bench further observed that it is incumbent upon the Authorized Representative of the homebuyers to obtain instructions to vote for any agenda item where CoC obtain votes. Where there is no voting of the CoC in an agenda item, the Authorized Representative’s opinion can be taken note of and considered in the CoC meeting.
The Bench held that when the CoC approves the Resolution Plan in its commercial wisdom, it is presumed that the approval was given to a viable and feasible plan. After the Resolution Plan is approved the Adjudicating Authority cannot interfere with the commercial wisdom of CoC. The approval of the CoC suggests that the plan is viable and feasible.
The Bench dismissed the appeal.
Case Title: Rajesh Kumar & Ors. v Rabindra Kumar Mintri & Anr.
Case No.: Company Appeal (AT) (Insolvency) No.1489 of 2022
Counsel For Appellants: Mr. Dhruv Dewan, Mr. Kshitj Mudgal, Mr. Prayay Sharn and Mr. Ravilochan Daliparthi, Advocates.
Counsel for Respondent: Mr. Apoorv Agarwal, Ms. Riya Thomas and Mr. Manav Goyal, Advocates for R-1. Mr. Adhish Sharma and Mr. Nitin Pandey, Advocates for R-2.