NCLAT Upholds CIRP Extension: Dissenting Creditor Cannot Undermine CoC’s Commercial Wisdom and Revival Efforts

The NCLAT upheld the CIRP extension, holding that a dissenting creditor cannot override the commercial wisdom of the Committee of Creditors or obstruct genuine efforts toward revival of the Corporate Debtor.

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 a set of two appeals and held that a dissenting financial creditor holding a negligible voting share cannot override the commercial wisdom of the Committee of Creditors (CoC), which had approved a 60-day exclusion from the CIRP period with a 95.01% majority. The Tribunal emphasized that such exclusion was justified in light of ongoing resolution efforts and recent judicial developments favoring revival. Reaffirming that liquidation is to be treated as a last resort under the IBC, the NCLAT upheld the Adjudicating Authority’s decision, noting that exclusion of time was warranted where there is a realistic prospect of a viable resolution plan.

The National Company Law Appellate Tribunal (NCLAT) dismissed two appeals filed by a dissenting financial creditor, Edelweiss Asset Reconstruction Company Ltd., challenging the orders passed by the NCLT, Allahabad Bench, on 24.01.2025. The impugned orders respectively allowed IA No. 425 of 2024, granting exclusion of 60 days from the CIRP timeline, and rejected IA No. 507 of 2024, which had been filed by the appellant seeking dismissal of the exclusion application and initiation of liquidation proceedings against the Corporate Debtor, M/s Usha India Ltd. The CIRP had commenced on 05.10.2023, and despite multiple attempts via publication of Form-G, a compliant resolution plan had not been received within the prescribed time.

The Appellant, holding only 0.17% voting share in the CoC, argued that the RP was unduly prolonging the CIRP and emphasized that liquidation would be a more viable option given the fixed deposits and immovable properties held by the Corporate Debtor. However, the NCLAT took note that in the 19th CoC meeting held on 23.08.2024, 95.01% of the CoC members had voted in favour of seeking a 60-day exclusion, citing multiple pending issues including a writ petition concerning fixed deposits, resolution plan deliberations, and reconstitution of the CoC.

The Tribunal also observed that the Delhi High Court had allowed the release of significant fixed deposit amounts in favour of the Corporate Debtor, thereby justifying the request for additional time to finalize resolution proceedings.

Further, the NCLAT noted that a resolution plan had been received from the applicant who had earlier withdrawn, but only after the extended timeline expired. Importantly, it was acknowledged that the received resolution plan exceeded the liquidation value, reinforcing the principle that resolution should be preferred over liquidation, which is considered a last resort under the IBC. The Tribunal cited the Supreme Court’s judgment in Swiss Ribbons Private Limited and Another v. Union of India and Others, REEDLAW 2019 SC 01504 to reiterate the primacy of resolution and revival of corporate debtors over corporate death through liquidation.

Given the overwhelming support from the CoC and the justifiable grounds presented by the RP, the NCLAT held that the Adjudicating Authority had rightly exercised its discretion in granting the exclusion. It concluded that a dissenting creditor with an insignificant vote share cannot override a commercial decision of the CoC taken with near unanimity. Accordingly, the appeals were found to be without merit and were dismissed.

Mr. Krishnan Venugopal, Sr. Advocate with Mr. Kaushik Mishra and Mr. Abhinabh Mathew, Advocates, represented the Appellant.

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