NCLAT or NCLT cannot sit in an appeal over the commercial wisdom of Committee of Creditors – Supreme Court
ABCAUS Case Law Citation
ABCAUS 3601 (2022) (06) SC
Important case law relied referred:
Arun Kumar Jagatramkav. Jindal Steel and Power Limited and Another
K. Sashidhar v. Indian Overseas Bank and Others
Jaypee Kensington Boulevard Apartments Welfare Association and Others vs. NBCC (India) Limited and Others
In a recent judgment, the Hon’ble Supreme Court has held that NCLT/NCLAT the cannot sit in an appeal over the commercial wisdom of Committee of Creditors (CoC)
The appellant had challenged the judgment passed by the National Company Law Appellate Tribunal (NCLAT) dismissing the appeals filed challenging orders passed by National Company Law Tribunal (NCLT).
The NCLT had rejected the application filed by the Resolution Professional under Section 12A of the Insolvency and Bankruptcy Code, 2016 (IBC) read with Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 for withdrawal of the application filed u/s 7 of the IBC in view of the Settlement Plan submitted by the appellant creditor.
The Hon’ble Supreme Court stated that when 90% and more of the creditors, in their wisdom after due deliberations, find 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 finds the decision of the CoC to be wholly capricious, arbitrary, irrational and de hors the provisions of the Insolvency statute or the Rules.
The Hon’ble Supreme Court pointed out that 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%.
The Hon’ble Supreme Court stated that it has consistently held that the commercial wisdom of the CoC has been given paramount status without any judicial intervention for ensuring completion of the stated processes within the timelines prescribed by the IBC. It has been held that there is an intrinsic assumption, that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts.
Thus the impugned judgment of NCLAT was quashed and set aside and the appeal was allowed.
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