Resolution Plan Valuation Challenge Rejected: NCLAT Upholds Committee of Creditors’ Commercial Wisdom and Bars Suspended Director’s Locus Standi
- REEDLAW
- Nov 3
- 5 min read
REEDLAW Legal News Network reports: In a pivotal ruling, the National Company Law Appellate Tribunal reaffirmed that a suspended director has no locus standi to challenge an approved resolution plan on valuation or distribution grounds. The Appellate Tribunal observed that the Committee of Creditors (CoC) exercises exclusive commercial wisdom in approving a compliant resolution plan, and such decisions are non-justiciable under the Insolvency and Bankruptcy Code, 2016. The judgment underscored the limited scope of judicial review over CoC-approved plans, fortifying the principle of finality once statutory compliance is met.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), while adjudicating a batch of two Company Appeals and connected Interlocutory Applications, held that a suspended director has no locus standi to challenge an approved resolution plan on valuation grounds. The Tribunal reiterated that the CoC’s commercial wisdom, once exercised in accordance with the Code and Regulations, is non-justiciable and cannot be interfered with by appellate authorities. This ruling further solidified the jurisprudence that valuation disputes fall outside the appellate domain once the plan has been duly approved by the CoC and the Adjudicating Authority.
The Appellant, being the suspended director of the Corporate Debtor, had filed two appeals under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the order of the Adjudicating Authority dismissing his intervention application and approving the resolution plan submitted by the Successful Resolution Applicant. The Appellant contended that the Corporate Debtor’s properties, including land at Jodhpur and Kalina, were grossly undervalued during the Corporate Insolvency Resolution Process, resulting in significant loss to the stakeholders. It was submitted that independent valuations commissioned by the Appellant indicated a substantially higher worth of these assets compared to the figures adopted by the Registered Valuers appointed by the Resolution Professional. The Appellant alleged collusion between the Resolution Professional and the Successful Resolution Applicant, asserting that the CoC’s approval was based on inaccurate valuation and that the Adjudicating Authority erred in rejecting the plea for a fresh valuation.
The Resolution Professional denied all allegations and maintained that the Corporate Insolvency Resolution Process was conducted in full compliance with the Code and the IBBI (CIRP) Regulations, 2016. It was submitted that the Appellant, as an ex-director, lacked locus standi to challenge the approval of the resolution plan and had repeatedly filed frivolous applications to derail the insolvency proceedings. The Resolution Professional emphasised that the Appellant had failed to cooperate during CIRP, withheld crucial asset information, and was subject to findings of fraudulent transactions by the Adjudicating Authority in separate proceedings. Reliance was placed on judgments of the Supreme Court and the Appellate Tribunal to contend that valuation is merely a guidance mechanism for the CoC and that its commercial wisdom in approving the resolution plan is non-justiciable.
The Committee of Creditors, supporting the Resolution Professional, submitted that the resolution plan had been approved with an overwhelming majority and that the Appellant’s objections were belated and barred by constructive res judicata, having been raised years after plan approval. It was further submitted that the approved plan value exceeded both the fair and liquidation values determined by the registered valuers, and the CoC’s decision was taken after due deliberation. The Successful Resolution Applicant contended that it fulfilled all eligibility criteria under Section 29A of the Code and that its plan was compliant with Section 30(2). It was submitted that the Appellant’s allegations of collusion were unsubstantiated and that payments under the approved plan had already been made in accordance with the terms. The Asset Reconstruction Company, holding a majority voting share in the CoC, also supported the approval of the plan and maintained that the Adjudicating Authority’s order was justified.
Upon consideration, the Appellate Tribunal observed that the Appellant had challenged the order of the Adjudicating Authority, which had dismissed the intervention application and approved the resolution plan. The Tribunal noted that the Appellant’s primary grievance related to alleged irregularities in valuation and purported collusion between the Resolution Professional, the CoC, and the Successful Resolution Applicant. It was observed that the Appellant had not raised these objections during the CIRP despite having attended several CoC meetings and having full knowledge of the valuation reports and plan proceedings. The Tribunal further noted that the approved resolution plan had obtained 95.40% CoC approval and that the valuation process was carried out by IBBI-registered valuers in accordance with Regulation 35 of the CIRP Regulations.
The Appellate Tribunal reiterated that the commercial wisdom of the CoC, including its decision to approve a resolution plan, cannot be interfered with by the appellate authority unless there is a demonstrable violation of the Code. The Tribunal held that the Appellant, being a suspended director, had no locus standi to challenge the resolution plan on valuation grounds and that the private valuation report procured by the Appellant post-approval had no evidentiary value under the Code. Consequently, the Appellate Tribunal found no merit in the appeals and upheld the order of the Adjudicating Authority approving the resolution plan and dismissing the intervention application.
Mr. Malak Bhatt, Ms. Neeha Nagpal and Mr. Shreyansh Chopra, Advocates, represented the Appellant.
Mr. Nikhil Nayyar, Sr. Advocate with Mr. Divyanshu Rai, Mr. Subh Gautam, Ms. Taruna, Ms. Vishal Sharma and Mr. Pulkit, Advocate, appeared for the R-1.
Mr. Palash S. Singhai, Mr. Harshal Sareen, Advocates, appeared for the SRA-Vaishali Patrikar, RP.
Mr. Abhirup Das Gupta, Mr. Ishaan Duggal, Ms. Ruchi Goyal, Advocates, appeared for the R-4.
Mr. Vaibhav Gaggar, Sr. Advocate with Mr. K. Pandy, Mr. Devashish Chauhan, Ms. Madhura MN, Ms. Jasleen Singh, Advocates, for the Respondents.
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