NCLAT upheld the Committee of Creditors' (CoC) commercial wisdom in resolving disputes over the resolution plan and affirmed the liquidation order.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Technical Member Mr. Barun Mitra, reviewed multiple appeals and held that the Successful Resolution Applicant's (SRA) failure to unconditionally accept the Letter of Intent (LoI) within the prescribed timelines, along with delays in compliance, justified the Committee of Creditors (CoC) decision to liquidate the Corporate Debtor. The judgment reaffirmed the limited judicial review of the CoC's commercial wisdom under Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016, as upheld in K. Sashidhar v. Indian Overseas Bank and Others, REEDLAW 2019 SC 02502.
The National Company Law Appellate Tribunal (NCLAT) addressed three appeals arising from the orders of the National Company Law Tribunal, Mumbai Bench-II, concerning the dismissal of two interlocutory applications and the approval of the liquidation process for the Corporate Debtor. The case revolved around disputes concerning the conditionality of the Letters of Intent (LoI) issued by the Resolution Professional (RP) and the subsequent decision by the Committee of Creditors (CoC) to liquidate the Corporate Debtor.
The Corporate Debtor entered insolvency on August 9, 2018, with extensions totalling 361 days to the Corporate Insolvency Resolution Process (CIRP) period. The CoC approved a resolution plan submitted by the Successful Resolution Applicant (SRA) in May 2021 with near-unanimous support. However, conditional LoIs issued by the RP, allegedly deviating from the approved plan, became the focal point of contention. The SRA challenged the conditions, sought an unconditional LoI, and demanded a refund of its Earnest Money Deposit (EMD), asserting that liquidation contradicted the insolvency framework's revival intent. Conversely, the RP and CoC argued that the SRA's delays and non-compliance with procedural mandates left liquidation as the only viable course.
The Tribunal observed that the SRA had participated in multiple CoC meetings where conditions tied to the LoIs were discussed, yet raised no objections until after the LoIs were issued. The SRA’s non-compliance with timelines and inability to submit an unconditional plan hindered the resolution process. The CoC, exercising its commercial wisdom, resolved to forfeit the EMD and initiate liquidation after the statutory CIRP limit of 330 days expired.
Upholding the NCLT’s orders, the NCLAT ruled that the SRA's objections were belated and lacked merit, referencing the Supreme Court's decision in Ebix Singapore Private Limited v. CoC of Educomp Solutions Limited and Another, REEDLAW 2021 SC 09523, which precluded withdrawal or modification of approved plans by resolution applicants. The Tribunal emphasized the sanctity of procedural timelines under the Insolvency and Bankruptcy Code, 2016 (IBC), and reaffirmed the limited scope of judicial intervention in CoC decisions as established in K. Sashidhar v. Indian Overseas Bank and Others, REEDLAW 2019 SC 02502.
The appeals were dismissed, affirming the validity of the liquidation order. This judgment reinforces the principle that delays or procedural non-compliance by stakeholders undermine the CIRP's objectives, necessitating adherence to statutory provisions and prioritizing the CoC's commercial wisdom in insolvency resolutions.
Mr. Sanat Jariwala, CA, Ms. Purti Gupta, Ms. Henna George and Ms. Sangita Selwal, Advocates represented the Appellants.
Ms. Anjali Sharma and Mr. S.K. Sagar Advocates appeared for Respondent No. 1.
Mr. Deepak Bashta, Advocate appeared for Respondent No. 3.
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