The NCLAT ruled that the 'commercial wisdom' of the Committee of Creditors (CoC) in approving a resolution plan is paramount and not subject to judicial interference.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, led by Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, reviewed a set of appeals today and reiterated that the 'commercial wisdom' of the Committee of Creditors (CoC) in approving a resolution plan is paramount and not subject to judicial interference, except in cases of clear evidence of procedural irregularity or non-compliance with the provisions of the Insolvency and Bankruptcy Code. The NCLAT Bench held that clarifications sought from all applicants did not constitute modifications and upheld the CoC's discretion in the insolvency process.
The Appeals filed by unsuccessful resolution applicants challenged the National Company Law Tribunal's (NCLT) order approving the resolution plan submitted by Sarda Energy and Minerals Ltd. (SEML) for SKS Power Generation Chhattisgarh Ltd. The insolvency process began in April 2022 with an application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, leading to a series of resolution plans being submitted by various applicants, including Torrent Power Ltd., Vantage Point Asset Management, and SEML. After an inter-se bidding process, SEML's plan was approved by the Committee of Creditors (CoC) with a 100% vote share. The CoC’s decision, based on its commercial wisdom, became a key point in the appeals, with the NCLT emphasizing its discretionary authority in evaluating and approving resolution plans.
The appellants, including Torrent Power and Vantage, raised contentions around alleged procedural irregularities and discrimination, particularly focusing on modifications to SEML’s plan. Torrent Power claimed that SEML’s commercial offer had been altered under the pretence of clarifications. However, the Tribunal referred to an earlier NCLAT order and rejected these claims, clarifying that the CoC had sought uniform clarifications from all applicants and that no modifications had been made to SEML's plan. The Tribunal upheld that such clarifications were permissible and aligned with the CoC's discretion, emphasizing that there was no evidence of procedural perversity.
The Tribunal also dismissed other claims, including Jindal Power’s intervention regarding the modification of the resolution plan, and found that the financial data presented during the approval process had been properly considered. Citing the principle of "commercial wisdom" from previous Supreme Court rulings, the NCLAT reaffirmed that the CoC’s decisions, particularly in relation to the feasibility and viability of resolution plans, were not subject to judicial interference unless there was a violation of the provisions of the IBC.
In conclusion, the Tribunal upheld the approval of SEML’s resolution plan, rejecting the appeals from the unsuccessful resolution applicants. The judgment reaffirmed the limited scope for judicial review in insolvency proceedings, where the CoC's commercial decisions hold primacy unless there is clear evidence of irregularity or non-compliance with statutory requirements.
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