Adjudicating Authority Can't Override CoC's Majority Decision On Extension Of CIRP Period At Instance Of Minority Dissenting Creditor: NCLAT

Brief Facts

Corporate Insolvency Resolution Process (CIRP) against M/s Usha India Ltd. (Corporate Debtor) commenced on 05.10.2023. The Resolution Professional (RP) constituted the Committee of Creditors (CoC). Edelweiss Asset Reconstruction Company Ltd. (Financial Creditor/Appellant) held a 0.17% vote share.

The RP published Form-G thrice. The first publication did not receive any Resolution Plans. After the second publication, two entities submitted Resolution Plans. Both did not provide the requisite Bank Guarantee as a result of which the third Form-G was published. The deadline for submitting Resolution Plans was 06.07.2024.

On 01.07.2024, the Adjudicating Authority excluded 60 days period for completion of CIRP. The two Resolution Applicants failed to deposit the requisite amount.

On 08.08.2024, the CoC extended the submission deadline to 14.08.2024. On 20.08.2024, the RP received one Resolution Plan from Dr. Mukesh Kumar Agarwal and another from two prospective Resolution Applicants. On 23.08.2024, the CoC approved a 60-day exclusion from the CIRP period with over 95% vote share.

The RP filed an I.A. seeking exclusion of 60 days of CIRP period. On 08.10.2024, the Appellant filed an I.A. seeking an order for liquidation of the Corporate Debtor.

On 24.01.2025, the Adjudicating Authority allowed the I.A. filed by RP and granted the 60-day exclusion. It dismissed the I.A. filed by the appellant. Aggrieved by this order, the Appellant filed the Appeals.

Submission of the Appellant

Mr. Krishnan Venugopal, Senior Counsel for the Appellant submitted the Corporate Debtor had fixed deposit amounting to Rs.19.68 crores and had three immovable properties. The Appellant had security interest in Badarpur property and liquidating the Corporate Debtor shall be more beneficial to the stakeholders. He submitted that since no compliant Resolution Plan had been received even after publication of Form-G thrice, there was no ground for exclusion of 60 days.

Observations

The Tribunal observed that the law is well settled that liquidation should be the last resort. The Tribunal referred to the judgment of the Supreme Court in Swiss Ribbons Pvt. Ltd. and Anr. vs. Union of India and Ors. where it was held:

“... the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors…..”

The Tribunal observed that when 95.01% of the CoC members, after considering all aspects, passed a resolution for a 60-day extension, the Adjudicating Authority could not have overturned this decision at the instance of a dissenting Financial Creditor holding only a 0.17% vote share. “A dissenting Financial Creditor, who has security of one property is more interested in liquidation, but that cannot be a ground to direct the liquidation of the Corporate Debtor when 95.01% of CoC decided to seek extension”, the Tribunal stated.

The Tribunal held that when the Adjudicating Authority granted exclusion of 60 days, the consequence of it was rejection of the I.A. filed by Appellant.

The Tribunal dismissed the appeal.

Case Title: Edelweiss Asset Reconstruction Company Ltd. vs. Chirag Rejendrakumar Shah

Case Number: Company Appeal (AT) (Insolvency) No.242 of 2025

Date of Judgment: 18.02.2025