The NCLAT upheld the Committee of Creditors' discretionary authority to approve a resolution plan despite objections.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench of Justice Ashok Bhushan (Chairperson) and Barun Mitra & Arun Baroka (Technical Members) upheld the Adjudicating Authority's decision to approve the resolution plan, affirming that the commercial wisdom of the Committee of Creditors (CoC) cannot be interfered with, provided the resolution plan adheres to the legal requirements under the Insolvency and Bankruptcy Code.
The appeal filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, originated from the Order dated December 20, 2023, issued by the Adjudicating Authority of the National Company Law Tribunal, Mumbai Bench-I. This order approved the resolution plan of the Successful Resolution Applicant (SRA) and dismissed the interlocutory application filed by the ex-director of the Corporate Debtor, who objected to the plan's approval. The ex-director, now the Appellant, contested this order.
The case involved Genesis Resorts Pvt. Ltd., which had secured a loan of Rs.149.05 crore from the Bank of Baroda between 2012 and 2014, intended for a hotel construction project. The loan was restructured in February 2015 but subsequently went unpaid, resulting in the account being classified as NPA in November 2016. The Bank of Baroda sought initiation of the Corporate Insolvency Resolution Process (CIRP) to recover a total debt of Rs.231.09 crore. The Adjudicating Authority admitted the petition on December 11, 2019.
During the CIRP, the Resolution Professional (RP) issued a public notice inviting Expressions of Interest (EOI) and received 17 submissions, though only two resolution plans were ultimately received. The SRA's plan was approved by the Committee of Creditors (CoC) with unanimous support. The RP subsequently sought approval for this plan, while the ex-director filed an objection, which was rejected by the Adjudicating Authority.
The Appellant contended that the resolution plan was flawed due to significant irregularities, such as the undervaluation of assets and the eligibility of the SRA. The Appellant argued that the valuation process conducted by the RP was inadequate, relying on past valuations and failing to consider the full value of the assets. Additionally, the Appellant claimed the SRA was disqualified due to regulatory issues with SEBI and that the RP did not consult the Appellant adequately throughout the CIRP.
The Respondents, including the RP and the CoC, refuted these claims, asserting that the valuation adhered to the IBC regulations, was conducted by registered valuers, and was approved by the CoC. They also noted that the SRA had been vetted and found eligible, with any regulatory issues subsequently resolved. The Adjudicating Authority's approval of the resolution plan was based on the commercial wisdom of the CoC and adherence to legal standards.
Upon review, the NCLAT found no merit in the Appellant's arguments. It upheld the Adjudicating Authority's decision, noting that the valuation process followed the prescribed regulations and that the CoC's approval was based on its commercial discretion. The NCLAT concurred with the findings of the lower authority, stating that the Appellant's objections did not substantiate a claim for interfering with the approved resolution plan. Consequently, the appeal was dismissed, affirming the Adjudicating Authority's order.
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