What is the role of the Adjudicating Authority (AA) under the IBC? Can the AA go into the merits of the decision of the Committee of Creditors (CoC) or should it confine itself only to ascertaining whether due process under the law has been complied with? These questions have been settled by the Supreme Court in its verdict in the case of Pratap Technocrats Private Limited and Others v. Monitoring Committee of Reliance Infratel Limited and Another, REED 2021 SC 08515.
Supreme Court Bench comprising Justices D.Y. Chandrachud and M.R. Shah left no room for ambiguity when they said, "It needs no emphasis that neither the AA nor the Appellate Authority has an uncharted jurisdiction in equity."
They added, "There is no equity-based jurisdiction with the NCLT, under the provisions of the IBC." As such, "The jurisdiction of the AA or the Appellate Authority cannot extend into entering upon merits of a business decision made by a requisite majority of the CoC in its commercial wisdom. Nor there is a residual equity-based jurisdiction in the AA or the Appellate Authority to interfere in this decision, so long as it is otherwise in conformity with the provisions of the IBC and the Regulations under the enactment.”
A key peculiarity in the case was that the appellant argued that the court must give regards to guarantees of fair procedure and non-arbitrariness, principles duly established in Maneka Gandhi v. Union of India (1978) 1 SCC 248.
Rejecting the argument, the apex court noted that the IBC is a complete code, formed after due deliberation and that the AA does not have uncharted jurisdiction in equity.
In the present case, "Whether or not some of the financial creditors were required to be excluded from the CoC is of no consequence, once the plan is approved by a 100 per cent voting share of the CoC."
In the end, the Apex Court upheld the COC wisdom, who approved the plan with a 100 percent vote in the present case and noted that the AA is confined to the discipline and boundary of the statute, and is only required to ascertain if a resolution plan meets the criterion under the IBC. Therefore, the appeal was dismissed.