On an appeal under section 62 of the Insolvency & Bankruptcy Code, 2016, (IBC), against an order of the National Company Law Appellate Tribunal (NCLAT), which has upheld the order of National Company Law Tribunal, wherein an application seeking approval of the resolution plan for a debtor was kept in abeyance while directing the official liquidator to carry out revaluation of the assets of the Corporate Debtor, the Hon’ble Supreme Court set aside the order of NCLAT and NCLT, and held that the order of NCLT directing so to the Official Liquidator is not justified when the Committee Of Creditors (CoC) has approved the resolution plan without any objection and the statutory provisions of the IBC have been complied with.
A Financial Creditor had initiated a Corporate Insolvency Resolution Process (CIRP) against a Corporate Debtor. Pursuant to that a Resolution Professional was appointed, and a resolution plan as submitted by him was approved by the CoC by an 88.5% majority votes. Consequently, the Resolution Professional moved an application under section 30(6) and 31 of the IBC before the Adjudicating Authority, NCLT.
The NCLT, however, kept the Resolution Plan in abeyance, and directed the Official Liquidator to carry out revaluation and provide exact figures/value of the assets, on the ground that it was not convinced that the fair value of the asset has been projected in proper manner. After that an appeal under section 61 of IBC was filed before the NCLAT, against the said order of NCLT, which was dismissed by the NCLAT.
Consequently, on appeal under section 62 of the IBC the main issue raised before the Hon’ble Supreme Court was that whether NCLT/NCLAT could have gone into the issue of revaluation in the background of admitted & undisputed factual position that no objection was raised with regard to any deficiency/ irregularity either by the Resolution Professional or the CoC in finally approving the resolution plan.
The Hon’ble Supreme Court while deciding the appeal stated that question is the extent of jurisdiction and power of the Adjudicating Authority (NCLT) to go in the issue of revaluation when there is no objection so as to any irregularity in the approval of the resolution plan, by either party.
Deciding upon this issue the Hon’ble Court stated that the Adjudicating Authority (NCLT) has jurisdiction only under section 31(2) of the IBC which gives power not to approve only when the resolution plan does not meet the requirement under section 31(1) of the IBC. The Court also stressed that for such non-approval a reasoned order needs to be passed.
The Hon’ble Court further stated that no interference is warranted unless the approval by the CoC is failing the tests of the provision of the IBC especially section 30 & 31. While holding so the Hon’ble Apex Court relied on its decisions in K Sashidhar (2019)12 SCC 150 & Essar Steel (2020)8 SCC 531 wherein it was held that the CoC’s decision is not to be subjected to unnecessary judicial intervention.
The Court further reiterated that stricto sensu it is well settled that it is well within the CoC’s domain as to how to deal with the debt, and the commercial wisdom of the CoC is not to be questioned or casually interfered with.
Hence, the Hon’ble Supreme Court held that the order of NCLT directing the Official Liquidator, is not justified and cannot withstand the judicial scrutiny.
Ramkrishna Forgings Ltd. v. Acil Ltd. (Resolution Professional)
(2024) 2 SCC 122
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