The Division Bench of the Supreme Court, comprising Justices B.R. Gavai and Hima Kohli held on Friday that the commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring the completion of the stated processes within the timelines prescribed by the IBC.
In the present case, It has been held that there was an intrinsic assumption, that financial creditors were fully informed about the viability of the corporate debtor and the feasibility of the proposed resolution plan. They acted on the basis of a thorough examination of the proposed resolution plan and assessment made by their team of experts.
The provisions under Section 12A of the IBC have been made more stringent as compared to Section 30(4) of the IBC. Whereas under Section 30(4) of the IBC, the voting share of CoC for approving the Resolution Plan is 66%, the requirement under Section 12A of the IBC for withdrawal of CIRP is 90%.
When 90% and more of the creditors, in their wisdom after due deliberations, found that it will be in the interest of all the stakeholders to permit settlement and withdraw CIRP, the Adjudicating Authority or the Appellate Authority cannot sit in an appeal over the commercial wisdom of CoC. The interference would be warranted only when the Adjudicating Authority or the Appellate Authority found the decision of the CoC to be wholly capricious, arbitrary, irrational and de hors the provisions of the statute or the Rules.
The proceedings of the 13th, 14th and 15th meetings of the CoC would clearly show that there were wide deliberations amongst the members of the CoC while considering the Settlement Plan as submitted by the appellant. Not only that, the proceedings would also reveal that after suggestions were made by some of the members of the CoC, suitable amendments were carried out in the Settlement Plan by the appellant. One of the members of the CoC having a voting share of 23.60%, though initially opposed the Settlement Plant, subsequently decided to support the same. Accordingly, the NCLT itself, vide order dated 29th March 2021, directed the RP to reconvene the CoC meeting. As per the directions of the NCLT, on 1st April 2021, the 17th meeting of the CoC was reconvened, wherein the Settlement Plan was approved by 94.23% votes.
It was thus clear that the decision of the CoC was taken after the members of the CoC, had due deliberation to consider the pros and cons of the Settlement Plan and took a decision exercising their commercial wisdom. The Appellate Authority were therefore of the considered view that neither the learned NCLT nor the learned NCLAT was justified in not giving due weightage to the commercial wisdom of CoC.
The Supreme Court had, time and again, emphasized the need for minimal judicial interference by the NCLAT and NCLT in the framework of IBC. The Appellate Authority may refer to the recent observation of the Supreme Court made in the case of Arun Kumar Jagatramka v. Jindal Steel and Power Limited and Another, REED 2021 SC 03546.
The Appeals were allowed and the Application filed for withdrawal of CIRP, was allowed.