The NCLAT upheld the resolution plan amid dissent, emphasizing that the commercial wisdom of creditors prevails in the decision-making process.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench led by Justice Rakesh Kumar Jain (Judicial Member) and Mr. Indevar Pandey (Technical Member) reviewed an appeal and observed that the approval of a resolution plan by the Committee of Creditors (CoC) is based on the commercial wisdom of its members and is not subject to judicial scrutiny, affirming that dissenting financial creditors are entitled only to the liquidation value proportionate to their secured interest as per Section 30(2) of the Insolvency and Bankruptcy Code, 2016. The Appellate Tribunal found no error in the Adjudicating Authority's order regarding the valuation and allocation of liquidation proceeds, thereby upholding the resolution plan.
The NCLAT adjudicated an appeal involving a secured financial creditor who dissented from the resolution plan proposed by the Successful Resolution Applicants, Sunil Kumar Agarwal and Surendra Kumar Singhal. The appellant contested the Adjudicating Authority's order dated September 12, 2022, which approved the resolution plan for Shubhkamna Buildtech Pvt. Ltd. The Corporate Debtor had previously been admitted into insolvency proceedings following an application filed by M/s Concord Infrastructure Pvt. Ltd. The appellant, holding a 1.67% voting share in the Committee of Creditors (CoC), raised objections to the approved resolution plan, particularly focusing on the calculated liquidation value of ₹82.66 crores, arguing that it was not compliant with the Insolvency and Bankruptcy Code, 2016.
In addressing the appellant's concerns, the Adjudicating Authority clarified that the Resolution Professional had appropriately shared fair and liquidation values, prepared by an IBBI-registered valuer. It highlighted that the liquidation value payable to financial creditors was related specifically to their secured interest, per Section 30(2)(b) of the Code. The appellant contested the allocation of ₹79 lakhs as the liquidation value, claiming it did not reflect the proportion of their admitted claim, and argued that the registered valuers had inaccurately reduced the liquidation value under the RP's direction.
The respondent's counsel defended the Tribunal's order, emphasizing that dissenting creditors cannot demand full payment upon the approval of a resolution plan. They referenced precedents that confirm dissenting creditors are entitled to only a minimum payment based on their voting share, which in this case exceeded the liquidation amount. Ultimately, the NCLAT dismissed the appeal, upholding the Tribunal’s decision that the resolution plan had received substantial support from the CoC, with an 87.60% voting approval. The NCLAT found no basis for judicial interference with the Adjudicating Authority's ruling, citing the Supreme Court's position that the commercial wisdom of the CoC is paramount and not subject to judicial scrutiny, as reiterated in cases like K. Sashidhar v. Indian Overseas Bank and Others, REEDLAW 2019 SC 02502 and Ramkrishna Forgings Limited v. Ravindra Loonkar, Resolution Profession of ACIL Limited and Another, REEDLAW 2023 SC 11542.
Furthermore, the NCLAT noted that while the interpretation of Section 30(2)(b)(ii) of the Code was pending consideration by a larger bench, the existing ruling in Amit Metaliks was still applicable. Therefore, the Tribunal's order was upheld, affirming the resolution plan's validity and dismissing the appeal without costs. The outcome reinforced the principle that commercial decisions made by the CoC, particularly regarding asset valuations and distribution priorities, should not be interfered with unless there is a clear legal basis for doing so.
Mr. Shashank Agarwal, Mr. Abhishek Taneja, Advocates represented the Appellant.
Mr. Abhishek Anand, Mr. Nipun Gautam, Advocates appeared for the Resolution Professional
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