AA Cannot Enquire Into Justness Of Rejection Of Resolution Plan By COC: NCLAT Chennai

Background Facts

Trivandrum International Health Services Ltd. ("Corporate Debtor") is a Ministry of Micro, Small and Medium (MSME) company, which was admitted into the Corporate Insolvency Resolution Process ("CIRP") by the Adjudicating Authority on 07.02.2020.

Dr. C. Bharath Chandran ("Appellant/Resolution Applicant") was the Promoter and Erstwhile Director of the Corporate Debtor, who along with two other co-applicants (Dr. Pradeep Mahajan and Mr. Ramu Tatini) had submitted a Resolution Plan for revival of the Corporate Debtor. The Resolution Plan was approved by the Committee of Creditors. The Appellant was directed to furnish Performance Bank Guarantee of Rs. 5 Crores, which it failed to furnish. Thereafter, Appellant was given permission to replace two original co-applicants with two new Applicants. Then the Appellant was also permitted to submit a joint Resolution Plan with one another resolution applicant namely M/s Sabine Hospital and Research Centre. However, none of the Resolution Plans received the mandatory 66% votes of the CoC members.

Consequently, the Resolution Professional filed an application seeking Liquidation of the Corporate Debtor. The Adjudicating Authority allowed the application for liquidation of the Corporate Debtor on 02.06.2022. The Appellant filed an appeal before the NCLAT challenging the order of liquidation dated 02.06.2022.

Decision Of NCLAT

The Bench observed that the Adjudicating Authority had given fair and equal chances to both the Resolution Applicants to the extent that a 'Resolution Plan' in tandem and in co-operation of both the Parties could be submitted. However, both the Resolution Applicants could not do so. Further, there are no provisions under IBC which authorizes Adjudicating Authority to modify or interfere with the merits of the plan.

Since the CoC did not approve the plan by a vote of minimum 66% as required under Section 30(4) of IBC, hence the Resolution Plan had failed. When a rejected plan is placed before the Adjudicating Authority, then it is expected to do nothing more but to initiate Liquidation process under Section 33(1) of IBC.

The Appellant was given all possible opportunities to submit the Resolution Plan, including extension of time, replacement of co-applicant and opportunity to submit joint `Resolution Plan' with the other Resolution Applicant namely, M/s Sabine Hospital and Research Centre. Unfortunately, the Resolution Plan was not acceptable to the CoC. Also, the CoC had unanimously with 100% Voting Rights recommended for Liquidation of the Corporate Debtor.

It was observed that the Adjudicating Authority has no jurisdiction or authority to analyze or evaluate the decision of the CoC to enquire into the justness of the rejection of the Resolution Plan by the dissenting Financial Creditors.

The appeal was dismissed.

Case Title: Dr. C. Bharath Chandran v Ms. Sabine Hospital and Research Centre & Ors.

Case No.: Company Appeal (AT) (CH) (Ins) No. 320 of 2022

Counsel For Appellant: Mr. C.A. Raghunath Sarangapani, Advocate.

Counsel For Respondent: Mr. Vinod P.V., India Law, Advocate.

Click Here To Read/Download Order