NCLAT Upholds CoC Supremacy, Strikes Down Judicial Overreach in Resolution Plan Approval

The NCLAT upheld the supremacy of the Committee of Creditors and struck down the NCLT’s judicial overreach in modifying a duly approved resolution plan.

The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member), reviewed a set of appeals and held that the Adjudicating Authority (NCLT) lacks jurisdiction to alter the terms of a resolution plan duly approved by the Committee of Creditors (CoC). The Tribunal emphasised that judicial review under Section 31 of the Insolvency and Bankruptcy Code (IBC) is strictly limited to assessing compliance with Section 30(2) and does not permit interference with the CoC’s commercial wisdom. Furthermore, it clarified that challenges to an approved resolution plan must strictly fall within the limited grounds specified under Section 61(3) of the IBC; otherwise, such appeals are not maintainable.

The National Company Law Appellate Tribunal (NCLAT) adjudicated five appeals stemming from two orders dated 04.06.2024 issued by the National Company Law Tribunal (NCLT), involving the approval and subsequent modification of a resolution plan. The first set of appeals—Company Appeal (AT)(Ins) Nos. 1382, 1384, and 1486 of 2024—focused on the NCLT’s alleged overreach in modifying a resolution plan that had already been approved by the Committee of Creditors (CoC) with a 79.10% majority, led by Kotak Mahindra Bank, and valued at ₹18 crores. The appellants argued that the NCLT, by directing potential land acquisition compensation to be distributed under Section 53 of the IBC, fundamentally altered Clause 19(l) of the plan, which explicitly reserved such compensation for the Corporate Debtor.

The NCLAT concurred with these appellants, holding that the NCLT had indeed encroached upon the commercial wisdom of the CoC—an area where judicial intervention is limited. The appellate tribunal emphasised that under Section 31 of the Insolvency and Bankruptcy Code (IBC), the NCLT’s review powers are confined to verifying compliance with Section 30(2) and do not extend to revising terms that have been commercially evaluated and approved by the CoC. Consequently, the NCLAT allowed these appeals and set aside the impugned modification, reaffirming that adjudicating authorities must respect the sanctity of the CoC’s decisions unless statutory non-compliance is demonstrated.

In the second set of appeals—Nos. 1596 and 1597 of 2024—the challenge was to the resolution plan itself on grounds including its alleged nature as a disguised real estate transaction, failure to consider updated valuations, exclusion of pending Preferential, Undervalued, Fraudulent, or Extortionate (PUFE) application proceeds from liquidation value, and purported violations of the RFRP and IBBI regulations. These appellants also objected to the treatment of surplus CIRP costs as a penalty on dissenting creditors. The NCLAT, however, dismissed all contentions. It found that no official land acquisition notification existed despite the issue being discussed since 2018, and that Clause 19(l) adequately addressed the treatment of future compensation. The valuation had been conducted by registered professionals, and no objections were raised during CoC proceedings. The treatment of PUFE applications under Clause 44 was held to be in line with Regulation 38(2)(d), and the CoC’s clarifications did not constitute unauthorised modifications.

The appellate tribunal concluded that the resolution plan in question was both commercially viable and legally compliant and had received due endorsement from the CoC. It emphasised that the plan satisfied the requirements of Sections 30 and 31 of the IBC and that no grounds under Section 61(3) had been established to justify judicial interference. Citing established precedent, the NCLAT reiterated that the commercial wisdom of the CoC is non-justiciable except on clearly defined statutory grounds, which were absent in this case. Accordingly, these appeals were dismissed, and the NCLT’s orders approving the resolution plan were upheld.

In conclusion, the NCLAT reinforced the principle that judicial authorities must defer to the commercial decisions of the CoC unless there is a clear breach of statutory provisions. While it intervened to strike down the NCLT’s unauthorised modification in the first set of appeals, it firmly upheld the CoC-approved plan against broader substantive challenges in the latter set. This dual outcome underscores the limited scope of judicial review in insolvency resolution under the IBC framework.

Mr. Nakul Sachdeva, Mr Karandeep Singh, Mr Abhinandan Sharma and Mr Sagar Arora, Advocates, represented the Appellant.

Mr Abhijeet Sinha, Sr Advocate, Mr Abhishek Anand, Mr Karan Kohli, Ms. Ridhima, Advocates, Mr Mohit, Mr Gupta, Advocates, Mr Shalya Agarwal, Mr Sandeep Vij, Ms Ritika Gaur, Mr Neeraj, Advocates, Mr Ankur Goel and Mr Saket Singh, Advocates appeared for Respondent No. 1.

Mr Sanyam Goel, Resolution Professional, presented in person.

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