NCLAT Delhi Upholds Remitting Of Resolution Plan Back To COC For Compliance Of Sec 30(2) IBC

Background Facts

Twenty First Century Wire Rods Limited (“Corporate Debtor”) was admitted into Corporate Insolvency Resolution Process (“CIRP”) on 12.09.2018. Noble Marine Metals Co WLL (“Successful Resolution Applicant/SRA”) submitted a Resolution Plan for the Corporate Debtor, which was approved by the Committee of Creditors (“CoC”) with 87.22% votes. IDBI Bank Ltd., which holds 87.22% voting share also consented to the Resolution Plan.

The Resolution Professional filed an application under Section 31 of IBC for approval of the Resolution Plan by the Adjudicating Authority. Subsequently, Kotak Mahindra Bank Ltd. being a Financial Creditor of the Corporate Debtor, filed an application seeking rejection of the Resolution Plan and setting aside of voting concluded on 06.06.2019 qua the Resolution Plan having mandatory clause of release of personal guarantee of the Promoters.

The Resolution Plan required reconsideration only with regard to a clause relating to release of personal guarantee of the Promoters, which according to Committee of Creditors (“CoC”) is not in accordance with law. On 30.03.2022, the Adjudicating Authority held that it is open for CoC to deliberate the Plan and remitted the Resolution Plan to CoC for reconsideration in accordance with law. The SRA challenged the Order dated 30.03.2022 before NCLAT and argued that once the Resolution Plan has been approved, the Adjudicating Authority has no jurisdiction to send it back for reconsideration at the request of Financial Creditor.

Kotak Mahindra Bank argued that it is not the entire plan which has to be reviewed by CoC, rather deletion of a single clause which provides for mandatory release of the personal guarantee given by the Promoters has been sought.

NCLAT Verdict

The Bench observed that when a Resolution Plan is approved by the CoC then the same is binding between the CoC and Successful Resolution Applicant.

The Bench placed reliance on the Supreme Court judgment in Committee of Creditors of Essar Steel India Ltd. Vs. Satish Kumar Gupta & Ors., 2020 8 SCC 531, wherein it was held as under:

“Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of.”

The Bench opined that if the Adjudicating Authority finds that parameters under Section 30(2)(e) of IBC have not been satisfied, then the Resolution Plan can be sent back to the CoC to review and satisfy the parameters.

“The present is a case where CoC is not asking to withdraw from the Plan or asking for reviewing the entire Resolution Plan rather CoC has asked for leave of the Court for deleting clause in the plan which sought to release the promoters from personal guarantee given to the Financial Creditors.”

The Bench upheld the Adjudicating Authority’s order and directed CoC to expeditiously take a decision. The Resolution Professional has been directed to submit the modified Resolution Plan if any before the Adjudicating Authority.

The appeal has been disposed off.

Case Title: Noble Marine Metals Co Wll V Kotak Mahindra Bank Limited & Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 653 of 2022.

Counsel For Appellant: Mr. Avinash Bhati and Mr. Aditya Pande, Advocates Mr. Prasook Jain and Ms. Kshirja Agarwal, Advocates.

Counsel for Respondent: Mr. Arvind Nayar, Sr. advocate with Mr. Amit Mahaliyan, Mr. Akshay Joshi, Advocates for R-1. Mr. Bishwajit Dubey, Ms. Srideepa Bhattacharya, Ms. Aishwarya Gupta, Ms. Shubhangi Agarwal, Advocates for R-2.

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