Approval Of Resolution Plan By CoC Cannot Be Interfered With Unless Section 30(2) Of Code Is Breached: NCLAT
Mohd Malik Chauhan
7 Dec 2024 12:00 PM IST
The NCLAT New Delhi bench of Justice Ashok Bhushan (Judicial Member) and Barun Mitra (Technical Member) has held that approval of Resolution Plan by the Committee Of Creditors (CoC) cannot be interfered with unless it is violative of section 30(2) of the Code. Brief Facts The Corporate debtor was admitted into insolvency on December 19, 2019. In the absence of a viable...
The NCLAT New Delhi bench of Justice Ashok Bhushan (Judicial Member) and Barun Mitra (Technical Member) has held that approval of Resolution Plan by the Committee Of Creditors (CoC) cannot be interfered with unless it is violative of section 30(2) of the Code.
Brief Facts
The Corporate debtor was admitted into insolvency on December 19, 2019. In the absence of a viable resolution plan, the CoC decided to liquidate the corporate debtor. The resolution plan submitted by the Respondent No. 3 was reconsidered and approved with 100 % vote share after the tribunal directed the CoC for reconsideration of the said plan.
The Resolution Professional filed an application under section 31 of the code before the Adjudicating Authority seeking approval of the plan. The suspended management of the corporate debtor opposed the approval of the plan. However, the AA approved the plan and dismissed the objections raised by the suspended management. This appeal has been filed by them against this order.
The appellant submitted that the Adjudicating Authority in the impugned order has failed to consider the procedural irregularities committed by the RP. It also contended that Regulation 37 of the CIRP Regulations has not been complied with in the present case. It is also the case of the appellant that second addendum submitted by the Resolution Applicant was never put to vote and nor the valuation report was shared with the suspended management. It also argued that the RP has himself filed an application against the SRA for contempt as the SRA has failed to implement the plan.
On the other hand, it is the case of the respondent that all requisites processes were complied with and no irregularities was committed by the RP. It also argued that compliance of Regulation 37 is not mandatory and rather it is only directory in nature. It also added that valuation reports can only be shared with the CoC under confidentiality. It further argued that SRA has not implemented the Resolution Plan and matter is pending consideration before the Adjudicating Authority therefore this appeal is meritless.
Observations:
The tribunal observed that Clause (ba) of Regulation 37 of the CIRP Regulations on which reliance has been placed by the Appellant is regarding the restructuring of the Corporate Debtor, by way of merger, amalgamation and demerger. The above Clause in the Plan is required to be put if it is necessary, thus it cannot be said that Resolution Plan which does not contain any Plan pertaining to Regulation 37(ba) violates any provisions of law.
“The use of expression “as may be necessary” clearly indicates the intent of the statutory requirement. The Clause pertaining to restructuring of the Corporate Debtor is required to be put when it is necessary for insolvency resolution of the Corporate Debtor, hence a Plan which does not contain such Clause regarding restructuring of the Corporate Debtor cannot be said to violate any provisions of law” the bench observed.
The tribunal further observed that the second Addendum was never put to vote and what was put was Revised Resolution Plan with Addendum dated 28.12.2020 therefore there is no infirmity in not putting the second addendum to voting.
It further added that the Appellant in the Appeal has not made out any ground to the effect that Resolution Plan submitted by Respondent No. 3 violates any of the provisions of Section 30(2) of the IBC.
“It is well settled that commercial wisdom of the CoC in approving the Resolution Plan needs no interference by the Adjudicating Authority/Appellate Tribunal unless the Plan is violative of Section 30(2). The Hon'ble Supreme Court in the matter of `K. Sashidhar' Vs. `Indian Overseas Bank & Ors.' reported in (2019), has held that legislature has not endowed the Adjudicating Authority with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC” the tribunal observed.
The tribunal also noted that the Valuation Report was shared with the Members of the CoC and no Member of the CoC raised any objection regarding the valuation. The issue of valuation cannot be allowed to be raised by the Appellant at this stage.
Finally, the tribunal observed that no error was committed by the Adjudicating Authority in approving the Resolution Plan. Accordingly, the present appeal was dismissed.
Case Title: Yogeshkumar Jashwantilal Thakkar and Anr. Versus George Samuel, Resolution Professional of Jason Dekor Private Limited and Anr.
Case Number: Company Appeal (AT) (Insolvency) No. 1417 of 2024
Order Date: 5/12/2024
