The NCLAT validated the decisions of the Committee of Creditors and the Resolution Plan approved after the CIRP expiry, following the grant of an extension, and dismissed claims of illegality.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra & Arun Baroka (Technical Members) was hearing an appeal and held that a resolution plan approved by the Committee of Creditors (CoC) remains valid if the Corporate Insolvency Resolution Process (CIRP) period is extended by the Adjudicating Authority, even if the plan was approved after the initial CIRP period expired.
The appeal was filed by a suspended director of M/s Drish Shoes Ltd., challenging the National Company Law Tribunal's (NCLT) order dated 01.07.2024, which rejected IA No. 1420 of 2024. This application was initially filed by the Appellant to contest the validity of decisions taken during the 19th Committee of Creditors (CoC) meeting held on 27.07.2023, arguing that the Corporate Insolvency Resolution Process (CIRP) had expired by then.
The Corporate Debtor's account had been declared a non-performing asset (NPA) on 09.11.2021 by the Bank of India. The CIRP commenced on 12.05.2022 following an application by M/s Reem Tanners Pvt. Ltd., and the Resolution Professional (RP) was confirmed on 01.09.2022. The Appellant proposed a one-time settlement (OTS) to the Bank of India on 05.07.2022 and revised it to Rs.55 crores by 22.09.2022. The CoC approved a resolution plan from Saboo Tor Pvt. Ltd. on 27.07.2023, but the Appellant objected to this decision on 29.07.2023, arguing it was made after the CIRP period had expired.
On 18.10.2023, the NCLT allowed an extension of the CIRP period by 30 days, excluding the time during which the extension application was pending. Despite this extension, the Appellant filed IA No. 1420 of 2024 on 10.06.2024, seeking to declare the decisions made in the 19th CoC meeting as illegal due to the expiration of the CIRP period.
The Appellate Tribunal heard arguments from all parties involved. The Appellant contended that the CoC's decisions were void due to the CIRP period expiring before the approval of the resolution plan. However, it was noted that the NCLT had validly extended the CIRP period, thus allowing the decisions taken by the CoC to remain within the legal timeframe. The Tribunal found that the extension granted by the NCLT made the approval of the resolution plan by the CoC lawful, and thus, rejected the Appellant's claims.
In conclusion, the Tribunal upheld the NCLT's decision to reject IA No. 1420 of 2024, finding no merit in the appeal. The appeal was dismissed, and the parties were directed to bear their own costs.
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