Rejected Prospective Resolution Applicant Lacks Locus to Challenge CIRP or Information Memorandum: NCLAT Upholds Resolution Process
- REEDLAW
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REEDLAW Legal News Network reports: In a significant ruling reinforcing the finality and sanctity of the corporate insolvency resolution process, the Appellate Tribunal held that a prospective resolution applicant whose resolution plan had been rejected and whose prior intervention had attained finality lacked locus standi to challenge the conduct of the CIRP or seek re-issuance of the Information Memorandum, particularly in the absence of any violation of Section 30(2) of the Insolvency and Bankruptcy Code, 2016.
The National Company Law Appellate Tribunal, Chennai Bench, comprising Justice Sharad Kumar Sharma (Judicial Member) and Mr. Jatindranath Swain (Technical Member), while adjudicating a company appeal along with connected interlocutory applications, held that a prospective resolution applicant whose resolution plan had been rejected and whose objections to the approved resolution plan had already attained finality could not maintain a subsequent challenge to the CIRP or seek re-issuance of the Information Memorandum. The Tribunal further clarified that alleged defects in the Information Memorandum could not be relied upon to derail or re-run the resolution process in the absence of any non-compliance with the mandatory requirements under Section 30(2) of the Code.
The Appellate Tribunal considered an appeal filed by the Appellant challenging the rejection of an interlocutory application by the Adjudicating Authority, whereby the Appellant had sought to assail the CIRP process and approval of a Resolution Plan on the ground of alleged deficiencies in the Information Memorandum. The appeal was accompanied by an application seeking condonation of delay, which was allowed as the appeal was filed within the extended limitation period prescribed under the proviso to Section 61(2) of the Insolvency and Bankruptcy Code, 2016.
The Tribunal noted that the Corporate Debtor had been admitted into CIRP and that the Appellant, though shortlisted as a Prospective Resolution Applicant, had failed to submit a Resolution Plan within the stipulated timeline. The Resolution Plan submitted by another Resolution Applicant was approved by the Committee of Creditors and was pending approval before the Adjudicating Authority. The Appellant thereafter filed an application invoking Section 60(5) of the Code read with Rule 11 of the NCLT Rules, seeking to set aside the CIRP process from the stage of issuance of the Information Memorandum and to direct issuance of a revised Information Memorandum and fresh invitation of Resolution Plans, alleging non-disclosure of certain liabilities and disputes.
The Tribunal observed that the Appellant’s intervention petition challenging the Resolution Plan had earlier been rejected by the Adjudicating Authority and that such rejection had been affirmed by this Tribunal in earlier appeals, which had attained finality. It was held that once the Appellant’s Resolution Plan stood rejected and such rejection was not challenged, the Appellant ceased to have any locus standi to either intervene in or challenge the approval of the Resolution Plan. The Tribunal reiterated that a person whose Resolution Plan had been rejected could not be treated as an aggrieved person for the purpose of questioning the commercial wisdom of the Committee of Creditors or the approval process of the Resolution Plan.
The Tribunal further held that allegations regarding inadequacy or defects in the Information Memorandum could not be used as a device to derail or re-run the CIRP, particularly after the Resolution Plan had reached the stage of approval. It was reiterated that interference with the Resolution Plan was permissible only in cases of express violation of Section 30(2) of the Code, and that the Adjudicating Authority and Appellate Tribunal could not sit in appeal over the commercial wisdom of the Committee of Creditors. The Tribunal found that the alleged information gaps had not materially impacted the Resolution Plan, especially where the Successful Resolution Applicant had acknowledged the relevant liabilities.
Concluding that the Appellant lacked locus standi, was neither a Resolution Applicant nor an aggrieved person, and had approached the Adjudicating Authority with the intent to derail the insolvency resolution process, the Tribunal upheld the rejection of the interlocutory application and dismissed the appeal, holding that no interference was warranted with the CIRP or the approval process of the Resolution Plan.
Mr. Arun C. Mohan, Advocate, represented the Appellant.
Mr. VVSN Raju, Advocate, appeared for the Respondent No.1/Resolution Professional.
Mr. Palash Taing, Advocate, appeared for the Respondent No.2/CoC.
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