NCLAT: Allegations Didn’t Undermine CoC’s Commercial Wisdom in Resolution Plan Approval Under IBC
- REEDLAW
- Aug 11
- 3 min read
Updated: Aug 12
REEDLAW Legal News Network reports: The National Company Law Appellate Tribunal (NCLAT) held that allegations raised against a Successful Resolution Applicant, when they do not affect compliance with the statutory requirements under Section 30(2) of the Insolvency and Bankruptcy Code (IBC), cannot serve as a valid ground to challenge or override the Committee of Creditors’ (CoC) commercial wisdom in approving a resolution plan.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, while adjudicating a Company Appeal, held that allegations raised against a Successful Resolution Applicant, without impacting statutory compliance under Section 30(2) of the IBC, cannot be a ground to question or override the Committee of Creditors’ commercial wisdom in approving a resolution plan.
An appeal was filed under the Insolvency and Bankruptcy Code, 2016 (IBC), by an Operational Creditor challenging the Adjudicating Authority’s order approving a resolution plan for the Corporate Debtor during the Corporate Insolvency Resolution Process (CIRP). The Operational Creditor argued that serious allegations of misconduct and irregularities had been raised against the Successful Resolution Applicant (SRA) and that these should have been considered by the Committee of Creditors (CoC) before granting approval to the plan. The appellant contended that such allegations questioned the SRA’s integrity and the plan’s implementability, thereby warranting rejection of the plan.
The Financial Creditor and the SRA opposed the appeal, maintaining that the resolution plan had undergone due scrutiny by the Resolution Professional, met all requirements under Section 30(2) of the IBC, and was approved by the CoC with the requisite voting share based on commercial and financial viability. They asserted that the allegations were extraneous to the statutory evaluation criteria and did not affect the feasibility or effectiveness of the plan’s implementation.
The National Company Law Appellate Tribunal (NCLAT) observed that the scope of judicial review over a resolution plan is confined to verifying compliance with Section 30(2) of the IBC, and that the CoC’s decision-making—being an exercise of its commercial wisdom—cannot be interfered with unless there is a breach of statutory provisions. It held that the allegations raised by the Operational Creditor neither undermined nor invalidated the CoC’s decision, as they did not impact the legal compliance or viability of the plan.
Consequently, the NCLAT dismissed the appeal, upheld the resolution plan’s approval, and reaffirmed that once the CoC’s commercial wisdom is exercised in accordance with the IBC framework, it must be given primacy and is not open to challenge on irrelevant or unsubstantiated grounds.
Mr. Romy Chako, Sr. Advocate, with Mr. Ajay Kumar Tiwari, Advocate, represented the Appellant.
Ms. Honey Satpal, Mr. Yash Dhyani, Ms. Pooja Singh, and Mr. Akash Agarwalla, Advocates, appeared for the Respondent.
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