Supreme Court Upholds CoC's Resolution Plan Decisions under Insolvency Law

The Supreme Court upheld the approval of a resolution plan by the Committee of Creditors (CoC) in accordance with the Insolvency and Bankruptcy Code. It emphasized that the Adjudicating Authority's jurisdiction is limited to ensuring compliance with statutory requirements and that commercial decisions of the CoC are not subject to judicial review. The Court clarified the fair treatment of operational creditors and addressed the impact of excluding certain financial creditors from the CoC. The valuation of preference shares and liquidation value was also discussed. Ultimately, the Court dismissed the appeal, affirming the decisions of the lower authorities.

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Issues Involved:
1. Jurisdiction to approve a Resolution Plan.
2. Exercise of jurisdiction by the Adjudicating Authority and Appellate Authority.
3. Fair and equitable treatment of operational creditors.
4. Impact of the exclusion of certain financial creditors from the Committee of Creditors (CoC).
5. Valuation of preference shares and liquidation value.

Issue-wise Detailed Analysis:

1. Jurisdiction to approve a Resolution Plan:
The Supreme Court emphasized that the jurisdiction of the Adjudicating Authority under Section 31(1) of the Insolvency and Bankruptcy Code (IBC) is to determine whether the resolution plan approved by the CoC complies with the requirements of Section 30(2). The Adjudicating Authority does not possess an equity-based jurisdiction beyond the statute. The approval of the resolution plan is a statutory function entrusted to the CoC, which must be approved with a voting percentage of not less than 66%.

2. Exercise of jurisdiction by the Adjudicating Authority and Appellate Authority:
The Court reiterated that the jurisdiction of the Adjudicating Authority is limited to ensuring compliance with Section 30(2) of the IBC. The commercial wisdom of the CoC in approving a resolution plan is not justiciable. The Appellate Authority's jurisdiction under Section 61(3) is similarly structured on specified grounds, including contravention of law, material irregularity by the resolution professional, and non-compliance with the criteria specified by the Board.

3. Fair and equitable treatment of operational creditors:
The Court held that the amount payable to operational creditors must be at least what is provided in Section 30(2)(b). The explanation to this section clarifies that a distribution in accordance with its provisions is deemed fair and equitable to operational creditors as a class. The Court emphasized that equitable treatment of creditors is only within the same class, and operational creditors are distinct from financial creditors. The resolution plan provided for payments to operational creditors at 19.62%, while financial creditors received 10.32%.

4. Impact of the exclusion of certain financial creditors from the Committee of Creditors (CoC):
The Supreme Court noted that the exclusion of certain financial creditors from the CoC, pursuant to the order of the NCLT in the Doha Bank proceedings, had no practical implication since the resolution plan was approved with a 100% majority. The exclusion affected only the inter se distribution among financial creditors and had no consequence for the operational creditors.

5. Valuation of preference shares and liquidation value:
The Court clarified that the realisable value from the sale of preference shares held by Reliance Bhutan Limited was included in the liquidation value of the Corporate Debtor. The liquidation value due to the unsecured operational creditors would remain nil in all scenarios, including if the corpus of Rs. 800 crores is separately considered. The liquidation value of the Corporate Debtor was Rs. 4339.58 crores, and the value being distributed under the approved resolution plan was Rs. 4520 crores.

Conclusion:
The Supreme Court concluded that the resolution plan was duly approved by a requisite majority of the CoC in conformity with Section 30(4). The jurisdiction of the Adjudicating Authority was confined to determining whether the requirements of Section 30(2) were fulfilled. The decisions of the Adjudicating Authority and the Appellate Authority were in conformity with the law. The appeal was dismissed, and pending applications, if any, were disposed of.

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