Adjudicating Authority Cannot Interfere with CoC’s Commercial Wisdom Once Resolution Plan Meets IBC Compliance: NCLT Mumbai
- REEDLAW
- Oct 8
- 4 min read
REEDLAW Legal News Network reports: In a decisive ruling, the National Company Law Tribunal (NCLT), Mumbai Bench, reaffirmed that once a resolution plan is approved by the Committee of Creditors (CoC) with the requisite majority and meets the statutory requirements under Section 30(2) of the Insolvency and Bankruptcy Code, 2016, the Adjudicating Authority has no jurisdiction to question or interfere with the CoC’s commercial wisdom. The Tribunal emphasised that its scrutiny is confined strictly to examining compliance with the provisions of the Code and not the business merits or feasibility of the plan.
The National Company Law Tribunal, Mumbai Bench, comprising Mr. K.R. Saji Kumar (Judicial Member) and Mr. Anil Raj Chellan (Technical Member), while adjudicating an Interlocutory Application filed by the Resolution Professional, held that once a resolution plan is approved by the Committee of Creditors with the requisite majority and found compliant with Section 30(2) of the Insolvency and Bankruptcy Code, 2016, the Adjudicating Authority cannot interfere with the CoC’s commercial wisdom and must limit its scrutiny to statutory compliance. The Bench observed that judicial intervention in the CoC’s decision-making process would defeat the object of the Code, which entrusts financial creditors with the primary responsibility for assessing the viability and feasibility of resolution plans.
The Resolution Professional filed an application under Section 30(6) of the Insolvency and Bankruptcy Code, 2016, seeking approval of the resolution plan submitted by the Successful Resolution Applicant, which had been unanimously approved by the Committee of Creditors (CoC) with 100% voting share. The Corporate Insolvency Resolution Process of the Corporate Debtor had been initiated on the petition of a Financial Creditor under Section 7 of the Code, and the Applicant was appointed as the Interim Resolution Professional. Despite delays in obtaining information from the suspended directors, the Resolution Professional successfully completed all procedural requirements, including publication of Form G, receipt and evaluation of Expressions of Interest, and finalisation of the resolution plan.
During the course of the CIRP, two prospective applicants submitted plans, both of which were duly examined and discussed across multiple CoC meetings. After evaluating compliance with Section 29A and necessary regulations, the CoC resolved to approve the plan submitted by the Successful Resolution Applicant. The Applicant confirmed compliance with Sections 30(2)(a) to (f) of the Code and Regulations 37 and 38 of the CIRP Regulations and filed the requisite Form H certificate certifying adherence to all legal requirements. The resolution plan included detailed provisions regarding CIRP costs, treatment of creditors, payment structure, implementation timelines, and appointment of a Monitoring Committee to oversee execution.
The Adjudicating Authority observed that the resolution plan met all statutory requirements under Section 30(2) and was consistent with judicial precedents laid down by the Hon’ble Supreme Court in K. Sashidhar v. Indian Overseas Bank and Others, REEDLAW 2019 SC 02502 and Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Others, REEDLAW 2019 SC 11505, reiterating that the Tribunal’s scope of review is limited to ensuring compliance with the Code and does not extend to re-evaluating the CoC’s commercial wisdom. Upon satisfaction of these conditions, the Tribunal approved the resolution plan along with its addendum, making it binding on the Corporate Debtor, its creditors, government authorities, guarantors, and all stakeholders.
The Tribunal further clarified that all claims not forming part of the approved resolution plan stood extinguished in line with the ruling in Ghanashyam Mishra and Sons Private Limited Through The Authorised Signatory v. Edelweiss Asset Reconstruction Company Limited Through The Director and Others, REEDLAW 2021 SC 04534, and the moratorium under Section 14 ceased from the date of the order. The Resolution Professional was directed to oversee implementation, report compliance periodically, and forward records of the CIRP and the approved plan to the Insolvency and Bankruptcy Board of India for record purposes.
Mr. Rohit Gupta, Advocate i/b Ms. Manisha Bhatia, Advocate, represented the Applicant.
Ms. Suman Gupta, Advocate, appeared for the Respondent.
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