The High Court declined jurisdiction to intervene in the Committee of Creditors' decision-making during the Corporate Insolvency Resolution Process, thereby upholding the principles of commercial wisdom and the oversight role of the NCLT.
The Delhi High Court Single-Judge Bench of Justice Dharmesh Sharma reviewed a petition and observed that the High Court will not interfere in the decisions of the Committee of Creditors (CoC) in the Corporate Insolvency Resolution Process (CIRP) unless there is a clear violation of legal principles, as the CoC's decisions are considered a matter of commercial wisdom and must be reviewed by the National Company Law Tribunal (NCLT) instead. The court reaffirmed that the petitioner has alternative remedies available and that the CoC's exercise of its powers must align with its fiduciary duties under the Insolvency and Bankruptcy Code (IBC).
The petitioner company invoked the writ jurisdiction of the High Court under Article 226 of the Constitution of India, 1950, seeking various reliefs against the respondents. The petitioner aimed for a mandamus directing the first respondent to develop a framework under the Banking Regulation Act, 1949, for financial institutions, including banks and Asset Reconstruction Companies (ARCs), to operate in a fair and transparent manner when approving resolution plans. Additionally, the petitioner sought a mandamus against several respondents to initiate a fresh voting process on its resolution plan while considering an email dated 05.09.2024. It also sought a direction to abide by principles of equality and fairness in evaluating its resolution plan.
The petitioner claimed to be the highest bidder in the Corporate Insolvency Resolution Process (CIRP) for the Corporate Debtor, Helios Photo Voltaic Private Limited, yet its bid was not accepted by the Committee of Creditors (CoC) during a meeting held on 05.09.2024, disregarding commercial norms. The petitioner, represented by Senior Advocate Mr. Rajiv Nayar, highlighted that its bid of ₹109.87 crore was declined by the CoC in what was termed an arbitrary manner, despite the Successful Resolution Applicant (SRA) offering a lesser amount of ₹99 crore within thirty days. The petitioner further asserted that its revised offer of ₹75 crore within ninety days during CoC deliberations was ignored.
Respondent No. 2, represented by Senior Advocate Mr. Jayant Mehta, contended that the bidding process was governed by private contractual principles and that being the highest bidder did not guarantee preference. He emphasized that the IBC (Insolvency and Bankruptcy Code, 2016) is comprehensive, with the CoC making decisions in its commercial wisdom. The respondent noted that the CoC had deliberated extensively before accepting the plan submitted by respondent No. 4, which involved immediate payment of ₹99 crore. It was argued that the petitioner could raise objections to the CoC's decision before the National Company Law Tribunal (NCLT), thus asserting that the writ jurisdiction of the High Court was not appropriate in this case.
In response, counsel for respondent No. 4, Alchemist Asset Reconstruction Company Limited, pointed out that it was a minority member of the CoC and had voted against the resolution favouring the petitioner, arguing that the CoC’s decision was based on a higher immediate payment from the other bidders. The petitioner, in rebuttal, referenced a Supreme Court decision emphasizing the CoC’s fiduciary duties and the need for a fair and transparent decision-making process in approving resolution plans.
After hearing the parties and reviewing the case, the High Court found no reason to issue a notice as the petitioner had alternative and efficacious remedies available to challenge the CoC's actions before the NCLT. The court underscored that the NCLT holds the jurisdiction to regulate the conduct of the CoC and that its decision on the resolution plan would be subject to judicial review. The court noted that the IBBI guidelines mandated objectivity, integrity, and impartiality from CoC members, emphasizing that the CoC's decisions should reflect fairness and reasonableness.
Ultimately, the court dismissed the writ petition, granting the petitioner the liberty to pursue remedies before the NCLT, which would decide the matter on its merits in accordance with the law. The petition and any pending applications were consequently disposed of, reinforcing the importance of following the established processes within the framework of the IBC.
Mr. Rajiv Nayar, Sr. Advocate along with Mr. Vaibhav Mishra, Mr. Ekansh Mishra, Mr. Ashu Kansal, Mr. Akash Shrivastav, Ms. Devika Mohan and Ms. Udita Singh, Advocates represented the Appellant.
Mr. Ayush Srivastava, Advocate appeared for Respondent No. 1/RBI.
Mr. Jayant Mehta, Sr. Advocate along with Mr. Dhruv Malik, Ms. Aditi Sinha and Rajnandini Singh, Advocate represented Respondent No. 2.
Mr. Prashant Mehta and Mr. Raghav Marwaha, Advocates appeared for Respondent No. 4.
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 Release and more.
Click on the Citation/Link to access these resources
Comments