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SC upholds Commercial Wisdom of CoC: Value of resolution plan may be lower than liquidation value

The Full Bench of the Hon’ble Supreme Court of India comprising of Justices R.F. Nariman, Aniruddha Bose, and V. Ramasubramanian in the matter of M/s. Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Others, Maharashtra Seamless Limited v. Padmanabhan Venkatesh and Others, REED 2020 SC 01501, by a judgment dated 22 January 2020 held that there is no requirement under the Insolvency and Bankruptcy Code, 2016 (IBC) that the resolution plan should match the maximized asset value of the Corporate Debtors. Further, as laid down in the case of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, REED 2019 SC 11505, the Supreme Court reiterated that once a resolution plan is approved by the Committee of Creditors, the Adjudicating Authority has limited power of judicial review. The brief facts of the case, the issues involved, and the Court’s ruling are discussed below.


The National Company Law Tribunal, Hyderabad Bench, by an order dated 21 January 2019, approved the resolution plan submitted by Maharashtra Seamless Ltd. (Resolution Applicant) in the Corporate Insolvency Resolution Process of United Seamless Tubulaar Private Limited (Corporate Debtor). However, an appeal was filed by the promoter of the Corporate Debtor, and one of the financial creditors - India Bank on the preliminary ground that the amount provided in the resolution plan is lower than the average of the liquidation value arrived at by the valuers. In this regard, the National Company Law Appellate Tribunal (NCLAT) by an order dated 8 April 2019 held that as the amount provided in the resolution plan was lower than the average of the liquidation value arrived at by the valuers, the resolution plan approved by the Adjudicating Authority is against Section 30(2) (b) of the Code. Aggrieved thereof, the Resolution Applicant preferred an appeal against the order of NCLAT before the Hon’ble Supreme Court.


The issues that arose for the consideration of the Hon’ble Supreme Court are as follows:

  • Whether the scheme of the IBC contemplates that the sum forming part of the resolution plan should match the liquidation value?

  • Whether Section 12A is the applicable route through which a successful Resolution Applicant can withdraw the Resolution Plan?


The Supreme Court noted that there are no provision in the IBC or concerned Regulations under which the bid of any Resolution Applicant has to match liquidation value arrived at in the manner provided in Clause 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. It added that once the CoC approves a resolution plan, the statutory mandate on the Adjudicating Authority under Section 31(1) of the IBC is to ascertain that a resolution plan meets the requirement of sub-section (2) and (4) of Section 30, which in the instant case are fulfilled. Further, the Court observed that NCLAT proceeded on equitable perception rather than commercial wisdom. Adjudicating authorities should cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. Hence, the scope of interference by the Adjudicating Authority is limited in judicial review as laid down in the case of Essar Steel, REED 2019 SC 11505.

On the second issue, Supreme Court held that the exit route prescribed in Section 12A does not apply to the Resolution Applicant in the present case. The procedure envisaged in the said provision only applies to applicants invoking Sections 7, 9 and 10 of the IBC. Moreover, having appealed against the NCLAT order with the object of implementing the resolution plan, Resolution Applicant cannot be permitted to take a contrary stand in an application filed in connection with the same appeal. Accordingly, in light of above reasoning, the Supreme Court set aside the order of NCLAT dated 8 April 2019 and directed the implementation of the Resolution Plan.

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