The Supreme Court upheld the commercial wisdom of the Committee of Creditors, ruling that SEZ dues were extinguished under the approved Resolution Plan, in line with the overriding provisions of the IBC.
The Supreme Court, in a Bench comprising Justice Abhay S. Oka and Justice Augustine George Masih, reviewed two appeals on Tuesday, upholding the Committee of Creditors’ commercial wisdom. The Court ruled that statutory dues under SEZ regulations, extinguished within an approved Resolution Plan, cannot be revived as the plan aligns with the IBC's overriding provisions. It affirmed that once approved, the terms of a Resolution Plan, including the extinguishment of claims not included within it, are binding and beyond interference.
In the present appeals, the Supreme Court examined a challenge by the NOIDA Special Economic Zone Authority, an operational creditor, against a decision by the NCLAT dated 14.02.2022. The appellant sought to overturn the NCLT’s approval of a resolution plan, which had awarded it only INR 50 lakhs against its admitted claim of INR 6.29 crores. The appellant argued that the corporate debtor, Shree Bhoomika International Limited, had defaulted on lease payments and violated SEZ guidelines. The NCLT had initiated the Corporate Insolvency Resolution Process (CIRP) for the corporate debtor, appointing an Interim Resolution Professional (IRP) who then constituted a Committee of Creditors (CoC) consisting solely of the Stressed Assets Stabilization Fund – IDBI Bank Limited. Following the valuation process, the liquidation value of the corporate debtor was fixed at INR 4.25 crores, leading to the approval of a resolution plan that was subsequently challenged by the appellant.
Upon examination, the Supreme Court found that the valuation conducted by the appointed valuers was based on relevant material and adhered to the prescribed procedures. The Court held that valuation questions are generally factual and do not warrant interference if the process is properly followed, relying on the precedent set in Duncans Industries Ltd. v. State of U.P. and Others. Additionally, the Court noted that the CoC’s commercial decisions on the viability of the resolution plan are non-justiciable, except in cases where Section 30(2) of the IBC was violated. Consequently, the CoC's decision to approve the resolution plan was upheld.
The appellant also contended that the resolution plan’s provisions contradicted SEZ rules by exempting the resolution applicant from certain statutory dues and transfer charges. However, the Court invoked Section 238 of the IBC, affirming the Code's overriding effect over other laws, including the SEZ Act. The Court underscored that the IBC framework prioritizes resolving corporate insolvency and provides an efficient mechanism for distributing available assets as per the approved resolution plan.
The Court noted that the appellant had already received the disbursed amount under the resolution plan, thus affirming the finality of the NCLAT’s decision. Drawing from established precedent in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Others, REEDLAW 2019 SC 11505 and recent rulings such as DBS Bank Limited Singapore v. Ruchi Soya Industries Limited, REEDLAW 2024 SC 01514 the Court concluded that statutory dues not included in a resolution plan cannot be claimed once the plan is approved. Thus, finding no merit in the appellant’s challenge, the Supreme Court dismissed the appeals without costs, leaving no pending applications.
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