Delhi High Court observed that the commercial wisdom of the CoC navigates the Corporate Insolvency Resolution Process in the right direction.
The Delhi High Court Single-Judge Bench of Justice Purushaindra Kumar Kaurav was hearing the petition of an ex-director of the Corporate Debtor and observed that the CoC takes the driver’s seat in this entire voyage of CIRP of Corporate Debtor and the “commercial wisdom‟ of the CoC functions in the same way as the Global Positioning System (GPS) works for the driver in any journey, leading the way to the intended destination.
In a recent judgment of significant importance, the High Court meticulously analyzed a petition filed by an ex-director of Su-Kam Power Systems Limited, who was entangled in insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) since 2018. The petitioner sought various reliefs, including the formulation of guidelines to monitor the Committee of Creditors (CoC), cessation of proceedings under the RDDBFI Act, and a halt on further legal actions against them. While acknowledging grievances against the CoC's functioning, certain reliefs were postponed pending further developments.
The High Court delved into the heart of the matter, particularly focusing on the petitioner's plea for CoC oversight mechanisms. Represented by senior counsel, the petitioner contended that CoC decisions had drastically diminished the company's value and transgressed IBC provisions. They emphasized the dire necessity for effective mechanisms to redress grievances arising from CoC conduct. On the other hand, respondents, which included banks and regulatory bodies, vehemently opposed the petition, arguing against judicial intervention in CoC decisions and pointing out the petitioner's purported role in the company's devaluation.
Diving into the legislative intent underpinning the IBC, the court aimed to ensure fairness and adherence to legal principles in addressing the petitioner's grievances. It underscored the imperative of a robust insolvency regime to ensure timely resolution and mitigate value erosion. Against this backdrop, the court directed the Insolvency and Bankruptcy Board of India (IBBI) to devise comprehensive guidelines within a strict timeline of three months. These guidelines were envisioned to ensure the CoC's efficacious functioning without undermining its commercial acumen and the legislative intent of the IBC.
The High Court's decision revolved around the petitioner's request for oversight mechanisms regarding the Committee of Creditors (CoC) within the Insolvency and Bankruptcy Code (IBC). It underscored the CoC's significant role in corporate insolvency resolution, highlighting the non-justiciability of its commercial decisions, as established by previous Supreme Court rulings. However, the court directed the Insolvency and Bankruptcy Board of India (IBBI) to draft guidelines within three months to ensure fair CoC decision-making, maintaining the balance between commercial wisdom and legislative intent in the IBC.
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