Supreme Court rules amended IBC voting thresholds cannot apply retrospectively to crystallized rights

The SC upheld NCLAT's rejection of resolution plans where voting share thresholds were not met under the original IBC provisions. The Court held that amendments to Section 30(4) reducing the voting threshold from 75% to 66% could not be applied retrospectively to cases where rights had already crystallized. Despite resolution plans receiving over 66% approval, they failed under the applicable 75% threshold. The Court declined to exercise Article 142 powers to allow retrospective application of amended provisions, ruling that absence of requisite approval within the 270-day statutory period mandated liquidation proceedings under Section 33 of the IBC.

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Issues Involved:
1. Whether the requirement of 75% voting share for approval of a resolution plan under Section 30(4) of the Insolvency and Bankruptcy Code (I&B Code) is mandatory.
2. Whether the amendments to Section 30(4) and related regulations have retrospective or prospective effect.
3. The scope of judicial review by the adjudicating authority (NCLT) and appellate authority (NCLAT) regarding the commercial wisdom of the Committee of Creditors (CoC).
4. The implications of the dissenting financial creditors not recording reasons for rejecting the resolution plan.

Issue-wise Detailed Analysis:

1. Mandatory Requirement of 75% Voting Share:
The Supreme Court held that the requirement of 75% voting share for the approval of a resolution plan under Section 30(4) of the I&B Code is mandatory. The term "may" in Section 30(4) refers to the discretion of the CoC to approve or reject the resolution plan, but the threshold of "not less than seventy-five percent of voting share of the financial creditors" is mandatory. The court emphasized that any other interpretation would result in rewriting the provision and doing violence to the legislative intent.

2. Retrospective or Prospective Effect of Amendments:
The court examined the amendments to Section 30(4) and related regulations. It concluded that the amendments, including the reduction of the voting share threshold from 75% to 66%, are prospective. The amendments came into effect on 6th June 2018 and cannot be applied retrospectively to decisions made by the CoC before this date. The court stated that there is no indication that the legislature intended to undo the decisions already taken by the CoC prior to the amendment.

3. Scope of Judicial Review:
The Supreme Court held that neither the NCLT nor the NCLAT has the jurisdiction to reverse the commercial wisdom of the dissenting financial creditors. The court emphasized that the commercial decisions of the CoC are non-justiciable and that the adjudicating authority's role is limited to ensuring compliance with the requirements specified in Section 30(2) of the I&B Code. The court reiterated that the commercial wisdom of the financial creditors, expressed through their voting share, is paramount and cannot be questioned by the adjudicating authority.

4. Recording Reasons for Rejecting the Resolution Plan:
The court addressed the issue of dissenting financial creditors not recording reasons for rejecting the resolution plan. It noted that, as per the provisions applicable in October 2017, there was no requirement for dissenting financial creditors to record reasons for their decision. The requirement to record reasons was introduced by an amendment to the regulations effective from 4th July 2018. The court held that non-recording of reasons by dissenting financial creditors does not vitiate their decision, as the commercial decisions of financial creditors are non-justiciable.

Conclusion:
The Supreme Court upheld the decisions of the NCLAT, confirming that the resolution plans for the corporate debtors KS&PIPL and IIL were not approved by the requisite percentage of voting share of the financial creditors. Consequently, the initiation of the liquidation process was deemed appropriate. The court dismissed the appeals and companion applications, reiterating that the commercial wisdom of the CoC is paramount and non-justiciable.

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