No Provision In IBC To Send Resolution Plan Back To CoC For Reconsideration: NCLT New Delhi

The National Company Law Tribunal New Delhi bench of Mahendra Khandelwal (Judicial Member) and Rahul Bhatnagar (Technical Member) has held that there is no provision in IBC allowing the Adjudicating Authority to send the resolution plan back to the Committee of Creditors (CoC) for reconsideration at the CoC's request.

Further, the bench held that once a resolution plan is submitted to the Adjudicating Authority, its jurisdiction is very limited concerning the approval or rejection of the plan.

Brief Facts:

The NCLT admitted a company petition filed by the Financial Creditor, Punjab National Bank, under Section 7 of the Insolvency and Bankruptcy Code, and initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Saraya Industries Limited. Shravan Kumar Vishnoi (Applicant) conducted the CIRP in accordance with the provisions and regulations and during the 19th meeting of the Committee of Creditors (CoC) held on July 11, 2023, two resolution plans were submitted for voting. E-voting took place which resulted in the rejection of JFC Finance (India) Limited's plan and the approval of Swarajkranti Infratech Private Limited's (Respondent) plan with a 99.96% voting share.

Following this, the Applicant filed an application under Sections 30(6) and 31 of the Insolvency and Bankruptcy Code, 2016, read with Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, seeking approval of the resolution plan. Subsequently, on the request of Punjab National Bank, the Applicant convened the 21st CoC meeting to inform the CoC members that the NCLT allowed certain claims and directed their consideration on merits. Punjab National Bank expressed a desire to reconsider and renegotiate the resolution plan stating that the resolution value of Rs. 76 Crores was significantly lower than the liquidation value of Rs. 100 Crores.

The Applicant informed the CoC that there was no provision under the IBC for sending the resolution plan back for reconsideration. However, the Punjab National Bank representative referred to a judgment by the National Company Law Tribunal (NCLT) Ahmedabad in which the tribunal allowed the reconsideration of a resolution plan. Based on this precedent, a resolution was proposed for e-voting. The CoC approved the filing of the withdrawal of the resolution plan approval application with an 87.95% voting share. The Applicant approached the NCLT.

Observations by the NCLT:

The NCLT noted that the Applicant himself acknowledged that there is no provision under IBC allowing the Adjudicating Authority (AA) to remand a Resolution Plan back to the CoC for reconsideration at the CoC's request. Consequently, it held that the role of the AA is confined to either approving or rejecting the Resolution Plan as per Section 31 of the IBC.

The NCLT held that once a Resolution Plan is submitted to the AA, the AA's jurisdiction is very limited. The AA cannot return the plan to the CoC for further consideration solely based on the CoC's request. It held that this limitation applies even if the plan has been approved by the CoC which was in the petition was a significant majority of 99.96% in favor.

The NCLT referred to the decision of the Supreme Court in Greater Noida Industrial Development Authority vs. Prabhjit Singh Soni which elaborated on the grounds for remanding a plan. The Supreme Court held that such action is permissible if the Resolution Plan does not meet the parameters outlined in subsection (2) of Section 30 of the IBC and the relevant CIRP regulations.

Further, the NCLT referred to another Supreme Court decision in Ebix Singapore Pvt. Ltd. vs. Committee of Creditors of Educomp Solutions Ltd. & Anr where the Supreme Court ruled against enabling withdrawals or modifications of a Resolution Plan post-submission to the AA. It held that allowing such modifications could lead to unregulated negotiations and delay the CIRP which could negatively impact the Corporate Debtor, creditors, and the economy due to the depletion of liquidation value over time.

The NCLT also referred to the NCLAT's ruling in Kalinga Allied Industries India Private Limited vs. CoC and Ors. (Company Appeal (AT) (Insolvency) No. 689 of 2021) where it was held that once a plan is approved by the CoC and does not contain material defects, it becomes binding.

Therefore, the NCLT dismissed the application.

Case Title: Punjab National Bank Vs Saraya Industries Ltd

Case Number: IA 6058/2023 IN Company Petition No. (IB) – 2628/(ND)/2019

For the Applicant/Financial Creditor :Adv. Sunil Kumar Pandey in Inv. P/04/2024. Adv. Karuna Nidhi in IA no. 6381/2023 & IA No. 6382/2023. Adv. Akshay Lodhi and Adv. Pawan Reley along with Mr. Sohit Aneja Sole Proprietor of the Applicant in I.A. No. 660/2024. CS Gaurav Joshi in I.A. 2887/2024. Adv. Kumar Prateek, Adv. Shashi Ranjan Kumar, Adv. Rahul Dubey Adv in IA. No. 4119/2023.

For the Brokers :Adv. Tanveer Zaki and Adv. Sana Ansari in IA/5335/2023.

For the RP :Adv. Abhishek Anand, Adv. Karan Kohli, Adv. Palak Kalra. Adv Vinod Chaurasia, Mr. Sharavan Vishoni -RP

For the Respondent/Corporate Debtor :Adv. Varsha Banerjee, Applicant IA No.5122/2023, Repondent 1-2, IA No.2862/2022. Adv. Daleep Dhyani for Purvanchal Vidyut Vitran Nigam Ltd./respondent in IA NO.5356/2022.

Date of Judgment: 26.07.2024

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