NCLAT held that the commercial wisdom of the Committee of Creditors in approving a resolution plan is not subject to judicial review unless it violates statutory provisions.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra & Arun Baroka (Technical Members) was recently hearing an appeal and upheld the principle that the CoC's decision, based on commercial considerations, is final and non-justiciable unless it contravenes statutory provisions. The NCLAT held that the commercial wisdom of the Committee of Creditors (CoC) in approving a Resolution Plan is not subject to judicial review unless it violates statutory provisions. The appellant's plan, although considered, was rejected by the CoC in favour of another plan, which was deemed more viable.
The NCLAT judgment pertains to two appeals filed by Rajesh Kumar Damani, the promoter and ex-director of the Corporate Debtor, challenging an order dated 05.01.2024 passed by the Adjudicating Authority (National Company Law Tribunal), Special Bench (Court-II), Kolkata in IA No. 1330/(KB)/2022 and IA No. 1523/(KB)/2022. Both appeals arose from common facts and a common question of law and were heard together.
The brief facts of the case indicate that Financial Creditor- ‘Sreenath Finvest Pvt. Ltd.’ filed an application under Section 7, leading to the commencement of Corporate Insolvency Resolution Process on 03.11.2021. Mr. Jitendra Lohia was appointed as the Interim Resolution Professional (IRP). Subsequently, multiple Resolution Applicants, including the appellant, submitted their Expression of Interest (EoI) and Resolution Plans.
However, the appellant's plan was initially treated as non-compliant due to the absence of the Earnest Money Deposit (EMD) of Rs. 1 Crore. The CoC decided to conduct a Swiss Challenge Process between two Resolution Applicants, resulting in the approval of the plan submitted by 'Eastern Copper Manufacturing Company Pvt. Ltd.’ The appellant filed IA No.1330/KB/2022, seeking approval of his plan, and IA No.1523 of 2022, challenging the voting process and seeking reconsideration.
The Adjudicating Authority allowed IA No.1330/KB/2022 to approve the Resolution Plan submitted by 'Eastern Copper Manufacturing Company Pvt. Ltd.' and rejected IA No.1523 of 2022 filed by the appellant. Aggrieved by these orders, the appellant filed two appeals.
In the appeals, the appellant argued that his plan, which offered a higher value and included provisions for working capital, should have been approved. However, the respondents contended that the appellant's plan was duly considered and deliberated upon by the CoC, and the decision to approve the plan of 'Eastern Copper Manufacturing Company Pvt. Ltd.' was based on commercial wisdom.
The NCLAT, after considering submissions from all parties and perusing the record, found that the appellant's plan was duly considered by the CoC and that the decision to approve the plan of 'Eastern Copper Manufacturing Company Pvt. Ltd.' was within the commercial wisdom of the CoC. The NCLAT dismissed both appeals, upholding the orders of the Adjudicating Authority.
Click on the Citation to Read/Download the Judgment
Comments