NCLAT upheld the commercial wisdom of the CoC, approving the resolution plan and expunging the adverse remarks made against the former RP.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra reviewed two appeals and held that the CoC's approval of the resolution plan, based on its commercial wisdom and with the requisite majority, was not in violation of the IBC, and the adverse remarks against the former RP were unfounded and expunged; the reinitiation of the CIRP was deemed unnecessary as the new RP had progressed the process efficiently, ensuring asset maximization through competitive participation.
Two appeals were filed under Section 61(1) of the Insolvency and Bankruptcy Code (IBC) against a common order issued by the National Company Law Tribunal (NCLT) on 03.09.2024, which reinitiated the Corporate Insolvency Resolution Process (CIRP) for the Corporate Debtor, extended the CIRP period by 90 days, and replaced the Resolution Professional (RP), Fintech Restructuring LLP, with Mr. Ravindra Kumar Goyal. The appeals were filed by Saraswat Cooperative Bank Ltd., a secured financial creditor, and Fintech, the former RP.
The CIRP had been initiated on 21.02.2023, and the Committee of Creditors (CoC) had appointed Fintech as RP on 09.10.2023. After several public announcements and expressions of interest (EOIs), an e-bidding process culminated in the approval of Parth Poly Coat Yarn Pvt. Ltd.'s resolution plan with 84.52% support from the CoC in April 2024. However, the Adjudicating Authority identified multiple irregularities, including the improper marking of resolution plans before the submission deadline and voting by absent CoC members, ultimately rejecting the resolution plan and directing the restart of the CIRP from the issuance of Form-G, alongside Fintech's removal as RP.
Fintech contested the Adjudicating Authority's findings, asserting that the CoC had acted within its discretion and that the alleged irregularities were unsubstantiated. They emphasized that the commercial wisdom of the CoC should prevail and that the e-voting process, including the timing of plan evaluations, adhered to CIRP regulations. Saraswat, on the other hand, opposed the reinitiation of the CIRP, citing the time-consuming nature of the process and potential harm to their interests.
The NCLAT reviewed both appeals and found that the RP had not violated the IBC. The CoC's approval of Parth's resolution plan, with the requisite majority, was a result of the CoC's commercial wisdom. The adverse remarks made against Fintech's professional conduct were expunged. Moreover, the Financial Creditor's request to continue the voting process with the existing PRAs, rather than reinitiate the CIRP, was rejected. The NCLAT acknowledged that the new RP had already resumed the CIRP within the set timelines and allowed six PRAs, including Parth and Sanklecha, to compete, which enhanced the process and ensured asset maximization.
In conclusion, the NCLAT modified the impugned order to expunge the observations regarding the RP's conduct while upholding the remaining portions. Both appeals were disposed of, with no costs awarded.
Ms. Neha Agarwal, Advocate represented the Appellant.
Mr. Ravinder Kumar Goyal and Mr. Samaksh Goyal, Advocates appeared for the RP.
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