NCLAT Overturns Tribunal's Decision, SC Limits Review of Resolution Plans under IBC

The NCLAT set aside the Tribunal's order dismissing the Resolution Professional's application for approval of the resolution plan under the IBC, directing the plan's approval with a modification for implementation within 12 years. The Supreme Court emphasized the limited jurisdiction of NCLT and NCLAT in reversing commercial decisions of dissenting financial creditors, highlighting that judicial review of approved resolution plans is confined to specified sections of the IBC. The Tribunal subsequently approved the resolution plan, considering the NCLAT's direction and Supreme Court's ruling, ensuring adherence to the legislative intent and voting thresholds for corporate debtor revival.

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Issues:
1. Application for approval of resolution plan under sections 60(5) and 30(6) of IBC, 2016.
2. Challenge against the order passed by NCLAT regarding the application for approval of the resolution plan.
3. Jurisdiction of NCLT and NCLAT in reversing commercial decisions of dissenting financial creditors.
4. Scope of judicial scrutiny of approved resolution plan under sections 30(2) and 31(1) of IBC, 2016.

Issue 1:
The Resolution Professional filed MA 491/2018 seeking approval of the resolution plan under sections 60(5) and 30(6) of IBC, 2016. The application was dismissed by the Tribunal, imposing a cost on the Resolution Professional. The matter was challenged before NCLAT, which set aside the impugned order and directed the Adjudicating Authority to approve the plan in accordance with section 31 of the IBC, with a modification for implementation within 12 years as offered by the successful resolution applicant.

Issue 2:
The Resolution Professional submitted the NCLAT's order to the Tribunal, which heard arguments from the Counsel representing the Resolution Professional and the Dissenting Financial Creditor. The Counsel for the Dissenting Financial Creditor requested time to file an appeal against the NCLAT's order. The Supreme Court's ruling in K. Sashidhar v. Indian Overseas Bank emphasized the limited jurisdiction of NCLT and NCLAT, stating that they cannot reverse the commercial decisions of dissenting financial creditors unless certain specified thresholds are met.

Issue 3:
The Supreme Court's decision in K. Sashidhar case highlighted that the judicial review of an approved resolution plan is confined to sections 30(2) and 31(1) of the IBC, 2016. The Court emphasized that the legislative intent does not allow the reversal of commercial decisions of the Committee of Creditors or dissenting financial creditors by the resolution professional, NCLT, or NCLAT. The scrutiny of a resolution plan must adhere to the specified voting thresholds to ensure a credible plan for successful corporate debtor revival.

Issue 4:
Considering the NCLAT's direction and the Supreme Court's ruling, the Tribunal approved the resolution plan, noting that it had been approved by the Committee of Creditors with the required majority and was in conformity with section 30(2) of the IBC, 2016. The Tribunal's approval was based on the limited scope of judicial review under sections 30(2) and 31(1) of the Code, as outlined by the Supreme Court. The Designated Registrar was instructed to communicate the order to relevant parties promptly.

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