2021 (1) TMI 446 - AT - Insolvency and Bankruptcy

Appeal dismissed, upholding liquidation order for Corporate Debtor. COC's decisions non-justiciable.

The appeal was dismissed, affirming the Adjudicating Authority's order for the liquidation of the Corporate Debtor. The Tribunal upheld the Committee of ... Liquidation of Corporate Debtor - section 61 of the Insolvency and Bankruptcy Code - HELD THAT:- Section 29A (b) of I&B Code shall be applicable in the instant case. According to this provision of the code, a person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person is a willful defaulter in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949. The Appellant had been declared as a willful defaulter in terms of Reserve Bank of India both by Respondent No. 1 bank i.e. OBC and Respondent No. 3 viz. SBI. Therefore, the Appellant has no locus standi to challenge the impugned order dated 8th November, 2019. The Appellant submitted a resolution plan pursuant to the order of Hon’ble High Court of Karnataka, which was placed before the COC which was rejected by the COC on the ground that it did not conform to the requirement of the code being Section 29A (b). The order of the Karnataka High Court only permitted the Appellant to submit its resolution plan to the RP. However, it did not in any way takes away the right of COC to reject the resolution plan on the ground that it is in contravention of the various provisions of law. It can be concluded that a limited judicial review is available in respect of an approved resolution plan. The grounds under Section 30(2) or 61(3) of the IBC are regarding testing the validity of the approved resolution plan by COC and not for approving the resolution plan which has been disapproved by the COC in exercise of its business decision. The Appellant cannot take plea that he was not given the statutory time period of 30 days to place his resolution plan as he had submitted his resolution plan well within time as agreed in the COC meeting i.e. on or before 16th September, 2019. The contention of the Appellant that COC abruptly decided not to seek extension of time for CIRP process from the Adjudicating Authority is invalid as it is the commercial wisdom of the COC whether they want to seek extension of time or not after considering the feasibility and viability of the submitted resolution plan. Appeal dismissed. Issues Involved:1. Applicability of Section 29A of the Insolvency and Bankruptcy Code (I&B Code).2. Rejection of the Resolution Plan by the Committee of Creditors (COC).3. Compliance with statutory requirements and timelines.4. Validity of the willful defaulter declaration.5. Commercial wisdom of the COC in rejecting the resolution plan and deciding on liquidation.Detailed Analysis:1. Applicability of Section 29A of the I&B Code:The core issue revolves around the applicability of Section 29A(b) of the I&B Code, which disqualifies a person declared as a willful defaulter from submitting a resolution plan. The Appellant, declared a willful defaulter by SBI and OBC, challenged the rejection of his resolution plan based on this provision.Judgment: The Tribunal observed that Section 29A(b) is applicable in this case. The Appellant, being a willful defaulter, is ineligible to submit a resolution plan. The Karnataka High Court's order allowed the Appellant to submit his plan but did not preclude the COC from rejecting it based on Section 29A(b).2. Rejection of the Resolution Plan by the COC:The COC rejected the Appellant’s resolution plan on grounds including non-compliance with I&B Code requirements, lack of necessary affidavits and undertakings, and the Appellant’s status as a willful defaulter.Judgment: The Tribunal upheld the COC's decision, emphasizing that the COC’s commercial wisdom in rejecting the plan is paramount and non-justiciable. The COC's decision was based on thorough examination and was within their rights under the I&B Code.3. Compliance with Statutory Requirements and Timelines:The Appellant argued that he was not given the statutory 30 days to submit his resolution plan and that the COC did not seek an extension for the CIRP process.Judgment: The Tribunal found this contention invalid. The Appellant had agreed to submit his plan by 16th September 2019 and did so. The COC’s decision not to extend the CIRP period falls within their commercial discretion.4. Validity of the Willful Defaulter Declaration:The Appellant contended that the willful defaulter declaration was made without following RBI guidelines and challenged this in the Karnataka High Court.Judgment: The Tribunal stated that the issue of the willful defaulter declaration is outside its jurisdiction and pending before the High Court. The RP and COC relied on the current status of the Appellant as a willful defaulter, which was appropriate.5. Commercial Wisdom of the COC in Rejecting the Resolution Plan and Deciding on Liquidation:The Tribunal reiterated that the commercial wisdom of the COC in rejecting the resolution plan and deciding on liquidation is non-justiciable. The COC’s decision to liquidate the Corporate Debtor was made with a significant majority and followed due process.Judgment: The Tribunal cited the Supreme Court’s decision in K. Sashidhar v. Indian Overseas Bank & Ors, emphasizing that the COC’s commercial decisions are paramount and not subject to judicial review. The Tribunal found no legal infirmity in the Adjudicating Authority’s order confirming the liquidation.Conclusion:The appeal was dismissed, affirming the Adjudicating Authority's order for liquidation of the Corporate Debtor. The Tribunal found no merit in the Appellant’s contentions and upheld the COC’s decision based on their commercial wisdom and compliance with the I&B Code.