Financial Creditor Who Does Not Attend Proceedings, Cannot Claim That Cirp Has Been Wrongly Conducted: NCLAT Delhi

Background Facts

CLC Industries Ltd. (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) on 03.01.2020. The Resolution Professional issued Form-G on 17.03.2020 for inviting resolution plans for the Corporate Debtor and the submission timeline was extended six times.

A Resolution Applicant submitted a Resolution Plan for the Corporate Debtor, which came to be approved by the Committee of Creditors (“CoC”) with 92.85% of voting share. On 20.04.2021, the Resolution Professional filed an application for approval of the said resolution plan by the Adjudicating Authority.

Consolidated Finvest & Holdings Ltd. (“Financial Creditor/Appellant”) is a Financial Creditor of the Corporate Debtor and also a member of CoC. The Financial Creditor had attended only one out of the total sixteen CoC meetings and neither voted in any agenda nor raised any objection regarding the process. On 04.09.2021 the Financial Creditor filed an application before the Adjudicating Authority seeking permission to submit a Resolution Plan for the Corporate Debtor and sought rejection of the Resolution Plan approved by the CoC.

The Adjudicating Authority vide an order dated 25.01.2023 rejected the application of the Financial Creditor and imposed a cost of Rs. 10 Lakhs for filing frivolous application. The Financial Creditor preferred an appeal against the order dated 25.01.2023 before the NCLAT.

NCLAT Verdict

The Bench observed that Form G was issued and extended six times, but the Financial Creditor never submitted any Resolution Plan. Therefore, its prayer to file a resolution plan afresh is not sustainable. It was observed as under:

“Financial Creditor of the Corporate Debtor have been given rights as per IBC to take steps for resolution of the Corporate Debtor and financial creditor who does not attend the proceeding, cannot be heard in saying that process has wrongly been conducted.”

It was opined that a financial creditor who does not attend CIRP proceedings has no right to challenge the conduct of such proceedings. The Bench upheld the Adjudicating Authority’s rejection of the application and declined to reduce the cost of Rs. 10 lakhs imposed on the Financial Creditor.

The appeal has been dismissed.

Case Title: Consolidated Finvest & Holdings Ltd. v Subhash Kumar Kundra

Case No.: Company Appeal (AT) (Insolvency) No. 312 of 2023

Counsel for Appellant: Mr. Kanishk Khetan, Ms. Varsha Banerjee, Advocates.

Counsel for Respondents: Ms. Prachi Johri, Advocate For R-2 Ms. Honey Satpal, Mr. Rohit Sharma, Advocates for R-1.

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