NCLAT New Delhi: Resolution Plan Cannot Be Rejected for CIRP Cost Structuring if Statutory Safeguards Are Ensured and CoC Approval Exists
- REEDLAW
- Aug 2
- 3 min read
Updated: Aug 12
REEDLAW Legal News Network reports that the NCLAT, New Delhi, has held that a resolution plan cannot be rejected merely for the manner in which CIRP costs are structured, provided statutory safeguards are ensured and the plan has been approved by the Committee of Creditors.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), while adjudicating a company appeal, held that a Resolution Plan which provides for the payment of CIRP costs through internal accruals, coupled with a binding fallback clause ensuring that the Resolution Applicant would bear the unpaid portion without impacting payouts to financial creditors, complies with the requirement under Section 30(2)(a) of the IBC. The Tribunal further held that clerical or typographical discrepancies in the plan documents do not constitute valid grounds for rejecting a Resolution Plan duly approved by the Committee of Creditors.
The National Company Law Appellate Tribunal (NCLAT) allowed an appeal filed by the Committee of Creditors (CoC) challenging the order of the Adjudicating Authority dated 03.06.2025, wherein the Resolution Plan had been sent back to the CoC on the ground of non-compliance with Section 30(2) of the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority had held that the Resolution Plan did not adequately provide for the payment of CIRP costs and contained other discrepancies, including inconsistencies in fund infusion figures and typographical variations in operational creditors’ claims.
The Appellate Tribunal examined the Resolution Plan, including its addendum, and observed that the plan specifically provided that if internal accruals were insufficient to meet CIRP costs, the Successful Resolution Applicant (SRA) would cover the unpaid portion without affecting payments to financial creditors. The NCLAT held that this clause complied with Section 30(2)(a) of the Code and the corresponding regulations, and that the Adjudicating Authority erred in interpreting it otherwise.
On the issue of fund infusion, the NCLAT noted that while the original Resolution Plan mentioned Rs. 92.15 Crores, the addendum clearly enhanced the total plan value to Rs. 110.10 Crores pursuant to negotiations with the CoC. The Tribunal held that the failure to amend the figure in the fund infusion clause was inconsequential, as the overall plan value stood undisputed and no stakeholder had raised any objection on this ground.
Regarding the discrepancy in the admitted claims of operational creditors—Rs. 12.63 Crores in Form-H versus Rs. 12.05 Crores in the addendum—the NCLAT found the variation to be a mere typographical error that did not affect the payout or violate any statutory provision. The payout amount remained unchanged at Rs. 0.13 Crores, and no operational creditor had objected to the plan on this basis.
The NCLAT concluded that the grounds cited by the Adjudicating Authority for rejecting the plan were unsustainable, and that the Resolution Plan did not suffer from any violation of Section 30(2). Holding that the Adjudicating Authority had overstepped its limited jurisdiction by interfering with the CoC’s commercial decision, the Appellate Tribunal set aside the impugned order and revived the plan approval application before the Adjudicating Authority for fresh consideration in accordance with law.
Mr. Krishnendu Datta Sr. Advocate, with Mr. Chitranshul Sinha, Mr. Shivam Shorewala, Mr. Rakshit Bhargava and Mr. Yash Tandon, Advocates, represented the Appellant.
Ms. Jyoti Singh, Advocate, appeared for the Respondent No. 1.
Mr. Harish Kant Kaushik, Advocate, appeared for the Resolution Professional (RP).
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