IN IA 3385 OF 2020 AND IB 432 (BD) OF 2019- NCLT- CoC acts on basis of thorough examination of proposed Resolution Plan and assessment made by their team of experts: National Company Law Tribunal reiterates need for minimal judicial interference by NCLAT, NCLT in accordance with IBC framework
Shri Bachu Venkat Balaram Das (Judicial Member) and Justice Atul Chaturvedi (Technical Member) [13-06-2023]

Read Order: Arun Kumar Sinha v M/s Three C Homes Private Limited

Simran Singh

New Delhi, June 16, 2023: The National Company Law Tribunal has held that the commercial wisdom of the Committee of Creditors (CoC) was given paramount status and the Adjudicating Authority (AA) was not endowed with the powers of jurisdiction or authority to analyse or evaluate the commercial decision of the CoC. The Resolution Plan submitted by the respondent/Successful Resolution Applicant (SRA) namely M/s. Ace Infracity Developers Private Limited had been unanimously voted by the CoC in its 5th meeting with 100% voting share, thus, AA could not interfere with the same.

In the matter at hand, the Resolution Professional (RP) filed the application under the provisions of Sections 30(6) read with Section 31 of the Insolvency & Bankruptcy Code, 2016 (Code) read with Regulation 39(4) of the Insolvency Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (IBBI CIRP Regulations) for approval of the Resolution Plan in respect of M/s. Three C Homes Private Limited (Corporate Debtor) which had been approved by the Committee of Creditors (CoC) in its 5th meeting held on 10.08.2020 submitted by SRA. The Adjudicating Authority (AA) vide order dated 06.09.2019 admitted the Company Petition filed by Mr. Arun Kumar Sinha (Financial Creditor), for initiating the CIRP under Section 7 of the Code against the Corporate Debtor and declared the moratorium and appointed the Applicant Mr. Gaurav Katiyar as an Interim Resolution Professional (IRP).

The Bench noted that as per CoC, the Resolution Plan met with the requirement of being a viable and feasible and for the revival of the Corporate Debtor. While navigating through the question as to whether the AA (NCLT) or the appellate authority (NCLAT) could sit in an appeal over the commercial wisdom of the CoC, the Bench referred to the case of Vallal RCK v. M/s. Siva Industries and Holdings Limited which had observed that “…commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring the completion of the stated processes within the timelines prescribed by the IBC. It has been held that there is an intrinsic assumption, that Financial Creditors are fully informed about the viability of the Corporate Debtor and the feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed Resolution Plan and assessment made by their team of experts….This Court has, time and again, emphasised the need or minimal judicial interference by the NCLAT and NCLT in the framework of IBC…”

The Bench further referred to the case of Arun Kumar Jagatramka v. Jindal Steel and Power Ltd. wherein it was observed that “However, we do take this opportunity to offer a note of caution for NCLT and NCLAT, functioning as the adjudicatory authority and appellate authority under the IBC respectively, from judicially interfering in the framework envisaged under the IBC. As we have noted earlier in the judgment, the IBC was introduced in order to overhaul the insolvency and bankruptcy regime in India. As such, it is a carefully considered and well thought out piece of legislation which sought to shed away the practices of the past. The legislature has also been working hard to ensure that the efficacy of this legislation remains robust by constantly amending it based on its experience. Consequently, the need for judicial intervention or innovation from NCLT and NCLAT should be kept at its bare minimum and should not disturb the foundational principles of the IBC”

The Tribunal further stated that the Resolution Plan was in accordance with Section 31 and 31 of the Code which complied with regulations 38 and 39 of the IBBI CIRP Regulations. It was thus stated that the reliefs, concessions and waivers sought by the SRA would be dealt with strictly as per law. As far as the question of granting time to comply with the statutory obligations/seeking sanctions from governmental authorities was concerned, the SRA was directed to do the same within one year as prescribed under section 31(4) of the Code.  The Bench warned that in case of non-compliance of the order or withdrawal of the Resolution Plan within the stipulated time, in addition to other consequences which follow under law, the CoC would forfeit the Earnest Money Deposit amount paid by the SRA as well as the Performance Guarantee.

In view thereof, the application for approval of the Resolution Plan was allowed and hence the said plan of Rs. 140,39,27,000/- was approved. It was stated that the Resolution Plan was binding on the Corporate Debtor and other stakeholders involved so that the revival of the Corporate Debtor Company should come into force with immediate effect.The Moratorium imposed under section 14 of the Code ceased to have effect from the date of this order.