NCLAT Affirms NCLT's Jurisdiction to Approve Cancellation of Power of Attorney in Resolution Plan
- REEDLAW
- Dec 10, 2024
- 3 min read
NCLAT upheld NCLT's jurisdiction to approve the cancellation of the Power of Attorney in the Resolution Plan under the IBC, affirming that the PoA became redundant during the CIRP and that the Resolution Plan's approval was within the commercial wisdom of the CoC.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, reviewed two appeals and held that the NCLT has jurisdiction under Section 238 of the IBC to approve the cancellation of a Power of Attorney (PoA) as part of the Resolution Plan. The Tribunal observed that the PoA, granted solely for development purposes, becomes redundant once the Corporate Debtor enters the Corporate Insolvency Resolution Process (CIRP), and the approval of the Resolution Plan, including its conditions, falls within the commercial wisdom of the Committee of Creditors (CoC).
In the case of Nirmal Lifestyle Realty Private Limited, the Appellant filed two Appeals challenging orders passed by the National Company Law Tribunal (NCLT) in the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor. The Appellant contested the rejection of its application under IA No. 3689 of 2022 and the approval of the Resolution Plan filed by Oberoi Constructions Limited. The dispute arose from a development agreement between the Corporate Debtor and Ralliwolf Limited, which granted development rights to the Corporate Debtor over a property in Mulund. The Appellant, as a suspended director, sought to challenge the waiver of the General Power of Attorney (PoA) under the Resolution Plan, arguing that the PoA could not be cancelled as it was a registered document.
The NCLT, after considering the submissions, dismissed the application, finding it to be vexatious and obstructive to the CIRP. The Tribunal concluded that the PoA was granted solely for facilitating development and had lost its purpose post-CIRP initiation. The Appellant, having lost control over the Corporate Debtor, was legally disqualified from acting under the PoA. The Tribunal relied on the Supreme Court’s decision in Gujarat Urja Vikas Nigam Limited v. Amit Gupta and Others, REEDLAW 2021 SC 03533, asserting that the Insolvency and Bankruptcy Code (IBC) provisions override other agreements like the PoA, and therefore, the cancellation of the PoA was within the Tribunal's jurisdiction. Furthermore, the Tribunal imposed costs on the Appellant for filing a vexatious application.
On appeal, the NCLAT upheld the NCLT’s decision, emphasizing that the PoA executed in favour of the Appellant was redundant post-approval of the Resolution Plan. The NCLAT also affirmed that the Resolution Plan, including its conditional clauses, was within the commercial wisdom of the Committee of Creditors (CoC) and did not contravene any legal provisions. The NCLAT dismissed the Appellant's challenge to the Resolution Plan, aligning with the broader jurisdiction granted to the insolvency courts under Section 60(5)(c) of the IBC. It was concluded that the PoA was not intended to confer personal rights and that its cancellation was valid for the effective progress of the CIRP. The Appellant’s reliance on the Suraj Lamp case was found misplaced, and the NCLAT upheld the order approving the Resolution Plan, affirming the NCLT's jurisdiction over such matters.
Mr. Abhijeet Sinha, Sr. Advocate with Mr. Anuj P. Agarwala, Mr. Aayush Agarwala and Ms. Mallika Luthra, Advocates represented the Appellant.
Mr. Ramji Srinivasan, Sr. Advocate with Mr. Shyam Kapadia, Ms. Shikha Ginodia and Mr. Mohit Bangwan, Advocates appeared for the RP.
Mr. Arvind Nayyar, Sr. Advocate with Mr. Tishampati Sen, Ms. Riddhi Sancheti, Mr. Anurag Anand, Mr. Mukul Kulhari and Mr. Akshay Joshi, Advocates appeared for Respondent No. 2.
Mr. Arun Kathpalia, Sr. Advocate with Mr. Denzil Arambhan, Mr. Pranaya Goyal, Ms. Ria Nandini, Ms. Apoorva Kaushik, Mr. Himanshu Shembekar, Mr. Omm Mitra and Mr. Yash Sethna, Advocates represented the CoC.
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