NCLAT held that CIRP extensions beyond 330 days were justified and that the non-disclosure of the valuation report to the Operational Creditor was non-prejudicial.
On 07-03-2025, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, reviewed an appeal and held that CIRP extensions beyond 330 days were justified, as the Appellant, having participated in CoC meetings, failed to challenge them at the relevant time. The Tribunal further ruled that the CoC's commercial wisdom, exercised with a 97.36% majority, prevailed. Additionally, the non-disclosure of the detailed valuation report to an Operational Creditor without voting rights was held to be non-prejudicial, and objections to the Form-G publication were deemed belated and irrelevant.
The appeal filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) arose from the Order dated 27.11.2024, passed by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench-II) in IA No 6 of 2024 in CP(IB)/9(AHM)2021. The Adjudicating Authority approved the resolution plan of the Corporate Debtor as submitted by the Resolution Professional. Aggrieved by the impugned order, the Appellant, an Operational Creditor, preferred the present appeal.
The Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor commenced on 07.12.2022, leading to the appointment of the Interim Resolution Professional (IRP), who constituted the Committee of Creditors (CoC) with two Secured Financial Creditors and two Unsecured Financial Creditors. The first CoC meeting was convened on 13.01.2023. On 10.03.2023, the IRP published Form-G, inviting Expressions of Interest (EOIs). As the CIRP period of 180 days expired on 05.06.2023, an application for a 90-day extension was allowed on 19.06.2023. Further, the CoC, in its 14th meeting on 29.08.2023, resolved to extend the CIRP beyond 270 days, which the Adjudicating Authority approved on 06.10.2023. Subsequent extensions followed, leading to a final extension up to 20.02.2024. The CoC approved the resolution plan submitted by Mercury Terra Firma on 29.01.2024 with a 97.36% vote, which was subsequently approved by the Adjudicating Authority on 27.11.2024.
The Appellant contended that the Adjudicating Authority approved the resolution plan in violation of Section 12 of the IBC by granting repeated CIRP extensions beyond 330 days without adequate justification. Additionally, the Appellant argued that the re-publication of Form-G in newspapers on 03.11.2023 but not on the IBBI website violated Regulation 36-A(2) of the CIRP Regulations. The Appellant also alleged that despite requesting valuation reports in the 17th CoC meeting on 19.10.2023, the RP only provided the fair and liquidation values without a detailed valuation report, thereby hampering the CoC's ability to exercise commercial wisdom judiciously. Furthermore, the Appellant claimed that Operational Creditors, with an aggregate admitted claim of Rs. 18.34 crores, were allocated only Rs. 60 lakhs under the resolution plan, thereby violating Section 30(2)(b) of the IBC.
In response, the Respondent argued that the resolution plan could only be challenged under Section 61(3) of the IBC, and no such grounds were substantiated. Regarding the valuation report, the Respondent submitted that the 17th CoC meeting had deliberated and recorded reasons for not sharing the full report with the Appellant. Given that Operational Creditors had no voting rights, the detailed valuation report was immaterial to them. The Respondent also emphasized that the Appellant, having participated in CoC meetings, never objected to the CIRP extensions at the appropriate time. Further, it was contended that since the resolution plan was at an advanced stage of consideration, the Adjudicating Authority was justified in granting an extension beyond 330 days. The Respondent asserted that the treatment of Operational Creditors under the plan was in compliance with the IBC, as they received more than the minimum liquidation value, which was nil. The approval of the plan by the CoC with a 97.36% vote underscored the commercial wisdom of the creditors, which could not be interfered with by the Adjudicating Authority.
After considering the submissions and reviewing the records, the Tribunal examined whether there were material irregularities in the CIRP process, whether Operational Creditors were deprived of their dues, and whether there was any contravention of the provisions of law. The Tribunal found that the Appellant had knowledge of the CIRP extensions and had participated in the CoC meetings but did not challenge the extensions at the relevant time. The Tribunal further noted that the resolution plan was approved beyond 330 days, but this was permitted by the Adjudicating Authority on 08.01.2024 before the CoC’s approval on 29.01.2024. Given that the CoC had taken a considered decision regarding the CIRP extension, the Tribunal held that this justified the Adjudicating Authority’s decision to extend the CIRP period. The Tribunal also observed that the Supreme Court’s ruling in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, REEDLAW 2019 SC 11505. did not entirely prohibit CIRP extensions beyond 330 days, especially when only a short period remained for completion.
Regarding the valuation report, the Tribunal examined the minutes of the 17th CoC meeting and found that the issue was discussed, and CoC members had been provided with the fair and liquidation values. Since the Operational Creditor had no voting rights, the non-disclosure of the detailed valuation report did not cause any prejudice. The Tribunal also rejected the Appellant’s argument concerning Form-G, noting that the complaint was belated and that non-publication on the IBBI website primarily affected prospective resolution applicants, not the Appellant. Furthermore, the Tribunal held that raising such an objection at a late stage contradicted the Appellant’s concerns about CIRP delays.
Considering the facts, the Tribunal found no material irregularities in the approval of the resolution plan. The CoC’s commercial wisdom, exercised with a 97.36% majority, could not be interfered with. The appeal was dismissed, upholding the Adjudicating Authority’s approval of the resolution plan.
Mr. Ajay Kumar Tiwari, Advocate, represented the Appellant.
Ms. Honey Satpal, Mr. Nipun Singhvi and Ms. Pooja Singh, Advocates, appeared for Erstwhile Resolution Professional (RP).
Subscribers can access the Case, including Case Analysis, Ratio Decidendi, Headnotes, Briefs, Case Research, Cited Case Laws, Case Law Cross-references, and the latest updates on Statutes, Notifications, Circulars, Guidelines, Press Releases and more.
Click on the following Citation/Link to access these resources:
Comments